Unfair contracts

New unfair contract terms legislation came into effect fully across Australia on 1 July 2010, following a concerted campaign by CFA and its members.

These laws make unfair terms in consumer contacts void. Many industries use standard-form consumer contracts, including telecommunications, finance, motor traders, gyms, travel and utilities. A term will be unfair where it causes a significant imbalance in the rights and obligations between the parties, it is not reasonably necessary to protect legitimate interests of a supplier, and it causes detriment to the consumer.

Unfair contract terms might be those:
•  where you are penalised, but the supplier is not;
•  where the supplier can change or vary the contract terms or goods without asking you;
•  where the supplier has the sole right to interpret the meaning of the contract; and
•  where the supplier can avoid, limit or terminate the contract, but you can’t.

Other indicators of unfairness are: contracts with font sizes and styles that are difficult to read; contracts with long sentences, clauses or paragraphs; and contracts containing confusing jargon and technical terms. Certain terms cannot be determined to be unfair, for example the price of a good or service or the main subject of the contract.

CFA and its members are now paying attention to how the laws work in practice and whether the compromises that were made in bringing them into being will undermine their effectiveness. We’re also looking forward to reports from regulators that demonstrate that they have used the new laws to negotiate fairer contracts with industry.

How do you think the laws are going? Please provide your comments to the ACCC at their website.