Recent Precedent 2010 - Issue 4

Posted on 25 May 2010

Review Your Consumer Contracts

No Unfair Terms

New Federal laws require you to update your consumer contracts or risk significant fines and penalties. Under the new Trade Practices Amendment (Australian Consumer Law) Act, 2010 (Cth) you cannot have “unfair” terms in standard form consumer contracts.

What is Unfair?

A standard form consumer contract is an agreement where the terms offered to other parties are always the same and without any form of negotiation taking place.

If another party alleges that their agreement with you is a ‘standard form’ consumer contact, it will be up to you to prove that all ‘standard’ terms are reasonably necessary to protect your legitimate interests.

The Court will take into account the background of entering into the contract, including whether the other party was given a reasonable opportunity to negotiate the terms of the contract and the transparency of the contract and its terms.

A Court is likely to fi nd your contract to be unfair if it causes a significant imbalance in rights and obligations; is not reasonably necessary to protect your legitimate interests; and, would cause detriment.

If your contract is found to include unfair terms, a declaration may be made that could void the contract. A court may also order that you may damages and incur other significant penalities.

The new laws only apply to all consumer contracts entered into after 1 July 2010 and to all of your existing contracts that are renewed or varied after 1 July 2010.

What to Do

We can assist you to review the terms of your consumer contracts to assist you to comply with the new contract laws. Contact us for a Free Business Health Check on 1300 306 335 to set your mind at ease.