A Guide to the Law of Unfair Contract Terms

Eales & Mackenzie Lawyers Melbourne

The unfair contract term protections for consumers are located within national Australian Consumer Law and are also reflected in the Australian Securities and Investments Commission Act 2001. These laws are implemented to protect consumers and small businesses from being subject to unfair terms in circumstances where they have little or no opportunity to negotiate with the business. If you believe a term in a contract you are party or seek to be party to is unfair, a Contract Lawyer in Melbourne can assist you in the best course of action available to amend the term.

Standard form contracts

Standard form contracts are contracts commonly used by businesses and offer all consumers the same or similar contract terms. These contracts offer efficiency but must also take into account consumer laws. The unfair contract terms law operates to ensure that businesses do not include unfair terms in standard form contracts.

Terms and Contracts that are not protected by the law

Most terms in standard form consumer contracts are covered by the unfair contract terms law. However, the following terms are exempt:

  • terms that set out the price
  • terms that define the product or service being supplied
  • terms that are required or permitted by another law

There are also some general contracts that the law does not apply to. These include;

  • Insurance contracts (private health insurance is covered)
  • Shipping of goods contracts
  • Superannuation and investment scheme contracts

When is a term ‘unfair’?

There are a number of important factors to consider when determining whether a term is potentially unfair to consumers of small business. The most important thing to note is that the fairness of the term will be judged from the context of the contract as a whole, not as a stand-alone term. The Court will make the final decision on whether a term in contract is unfair, however, some things they will consider to reach a determination include whether;

  • The term is necessary to protect the legitimate interests of the business.
  • The term would cause unnecessary financial or non-financial detriment if enforced by the business.
  • The term is transparent.
  • There is an imbalance between personal rights and those of the business.
  • The term enables only one party to avoid or limit their obligations under the contract.
  • The term enables only one party to terminate the contract.
  • The term penalises only one party for breaching or terminating the contract.
  • The term enables only one party to vary the terms of the contract.

Effect of an unfair contract term

If a court finds that a term is ‘unfair’ the term will be deemed void and therefore not binding. The rest of the contract will continue to operate if capable of doing so without the unfair term. The first step however, should always be to seek consultation from an experienced lawyer who can contact the other party and seek to amend the term so it is no longer unfair.

Enquire Now
close slider
  • This field is for validation purposes and should be left unchanged.