The Commonwealth is likely to take control of consumer protection following proposals to amend the Trade Practices Act and hand over responsibility for many areas covered by the state's Fair Trading Acts. Importantly, the proposals include the power to review unfair contract terms, including terms in loan contracts.
Following a review of Australia's consumer policy framework by the Productivity Commission, all Australian governments agreed to a new consumer policy framework, comprising a single national consumer law and streamlined enforcement arrangements. Any new legislation is likely to commence in 2010.
A consultation paper (125 pages) has been released that can be accessed at http://www.treasury.gov.au/contentitem.asp?ContentID=1484&NavID=037. Submissions can be made until 17 March 2009.
Unfair contract terms
A key feature of the proposed amendments is the provision for dealing with 'unfair contract terms', which will relate exclusively to 'take it or leave it' standard form, non-negotiated contracts with consumers. A consumer (an individual or business) will be entitled to a remedy under the proposed provisions if the consumer, as an individual or as a member of a class, can establish detriment or a substantial likelihood of detriment. Detriment is not limited to financial detriment.
This provision is far reaching and if enacted, will result in many businesses having to review their standard form agreements or face the possibility of being involved in a contractual dispute with clients.
The likely definition of 'an unfair term' to be adopted in the proposed Australian Consumer Law is:
'A term is unfair when it causes significant imbalance in the parties' rights and obligations arising under the contract, and it is not reasonably necessary to protect the legitimate interests of the supplier.'
Some examples of terms identified by the consultation paper that might be caught by the 'unfair contract term' provision include terms that:
- permit a supplier to unilaterally vary the terms of a contract
- prevent the consumer from cancelling a contract
- exclude liability for harm resulting from the actions of a supplier or its agent
- penalise the consumer but not the supplier for breaches of terms of the contract
- purport to limit a consumer's right to take legal action against a supplier.
The types of contracts identified by the consultation paper that would be covered by an 'unfair contract terms' regulation include a very broad range of commercial activities, such as:
- communications services
- banking and financial services
- software end user licences, e-commerce and online auctions
- public and private transport services
- professional services (lawyers, engineers, surveyors, architects etc)
- subscription services
- vocational training.
The 'unfair contract terms' provision will ban certain unfair contract terms. Consideration is given to the banning of the following types of terms:
- terms retaining title for suppliers in goods that cannot be removed from consumers' premises without damage; terms allowing suppliers to repossess such goods
- terms denying the existence or validity of pre or post contractual representations made to consumers
- terms under which consumers acknowledge that they have read or understood the contract
- flat/fixed early termination fees and those requiring the paying out of a contract
- terms allowing suppliers to retain, debit or set off disputed amounts.
The Consumer Credit (Victoria) and Other Acts Amendment Bill 2008, in provisions yet to commence, extends Victoria's existing unfair contract terms legislation to credit contracts. It is unknown whether this initiative will be put on hold pending the Commonwealth initiative being implemented.
| Sydney | ||
| Jon Denovan | t +61 2 9931 4927 | e [email protected] |
| Vicki Grey | t +61 2 9931 4753 | e [email protected] |
| Melbourne | ||
| Danny Moore | t +61 3 9617 8596 | e [email protected] |
| Peter Grotjan | t +61 3 9617 8538 | e [email protected] |
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
