The Australian Consumer Law Unfair Contract Terms

The Australian Consumer Law (ACL) was enacted in 2010 and aims to protect consumers from unfair contract terms in standard form contracts. Standard form contracts are essentially pre-prepared contracts where one party (usually the business) has prepared and provided the terms of the contract and the other party (usually the consumer) has little or no ability to negotiate the terms.

Under the ACL, a term in a standard form contract will be presumed to be unfair if it meets the following criteria:

1. The term could cause significant imbalance in the parties’ rights and obligations

2. It is not necessary to protect the legitimate interests of the party who would benefit from the term, and

3. It would cause detriment (financial or otherwise) to a party if it were applied or relied on.

If a term is found to be unfair, it will be void and of no effect and cannot be enforced by the business.

Examples of unfair contract terms include terms that allow a business to unilaterally vary the terms of the contract without notice, terms that limit or exclude liability, and terms that allow a business to terminate the contract without cause or reason.

The ACL applies to contracts entered into or renewed on or after 12 November 2016, and covers a wide range of consumer contracts, including contracts for the supply of goods and services, contracts for the sale or hire of motor vehicles and contracts for the provision of financial services.

Businesses need to be aware of the unfair contract terms provisions of the ACL and ensure their standard form contracts are compliant. Failure to comply with the ACL can result in significant fines and reputational damage.

Businesses should review their standard form contracts and seek legal advice if they are uncertain about whether their terms are unfair or not. Consumers who believe they have been subject to an unfair contract term should contact the Australian Securities and Investments Commission (ASIC) or seek legal advice.

In conclusion, the unfair contract terms provisions of the ACL are an important consumer protection measure aimed at ensuring that consumers are treated fairly in their dealings with businesses. Businesses need to be aware of their obligations under the ACL and ensure they comply with the law to avoid potential legal and reputational consequences.