Court deletes unfair term in on-line contract

In 2010 the Federal government introduced new laws providing for unfair terms in standard form consumer contracts to be void. In January 2011, these laws became part of the Australian Consumer Law, which has standing as law on a Federal and State level.

A recent decision in the New South Wales Consumer, Trader & Tenancy Tribunal (“CTTT”), Malam v Graysonline (link here, considered the application of these new laws to contracts entered into online.

Mr and Mrs Malam purchased a table from the auction web site The table had a glass top. The auction was on terms requiring the goods to be picked up by the buyer, and the Malams arranged a courier to pick up their purchase. When it arrived, the glass was smashed and other parts of the table were bent. Mr Malam signed up for the user account with, and like most people entering contracts online, clicked the “yes” button to confirm his agreement to the terms of use without reading the them.

There was evidence that the goods were broken at the time they were picked up. Graysonline sought to rely on terms of the user agreement that purported to deny the buyer the right to return goods that had been picked up, once they had left the warehouse. The CTTT found that the terms were not reasonably transparent for reasons including that the terms were part of a 13 page agreement that was provided online. Transparency of the terms is one of the factors that courts and tribunals must consider when deciding whether the terms are unfair.

While this is a decision of a tribunal rather than a court, it is likely to have considerable influence over the interpretation of the unfair terms laws in New South Wales, as disputes under those laws will normally be heard in the CTTT rather than in New South Wales courts.

Especially in the case of online agreements, businesses who are supplying to consumers should take some care to ensure that the agreement is clear and concise. A 20 page agreement to buy a box of crayons is disproportionate to the transaction (no matter how darn great those crayons are) and likely to leave a court or tribunal with a lot of sympathy for the consumer who says they did not read it. In the context of this decision, the saying “less is more” takes on a very literal meaning – making an online agreement too long increases the chance of some of the terms being void.

Service providers and online merchants should undertake careful review of their online agreements to see what parts they really need and eliminate parts they do not so as to increase the chances of the agreement being enforceable. Generally, the length of the agreement that will be enforceable may be related to the size and importance of the transaction involved.

Troy Rollo

Article republished courtesy of Carroll and O’Dea lawyers