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New law balances the scales for consumers
On 17 March 2010 the Federal Parliament passed amendments to the Trade Practices Act which introduces a new regime to regulate unfair contract terms.
The aim of the amendments is to address a perceived inequality of bargaining power between consumers and businesses. Consequently, the amendments only apply to so called ‘standard form consumer contracts’ such as mobile phone and gym membership agreements.
A consumer contract will be considered as being a ‘standard form’ if it is prepared by a business and is not subject to negotiation by the consumer – ie it is offered on a ‘take-it-or-leave-it’ basis. A consumer contract will be presumed to be ‘standard form’ unless the business can establish that this is not the case.
The amendments provide that a term of a consumer contract will be unfair if the term:
What is an “unfair term” will need to be considered on a case-by-case basis. Consequently, many businesses could face considerable uncertainty from 1 July 2010. However, the amendments only apply to new standard form consumer contracts – ie contracts which are:
What Do I Need To Do?
If you run a business which deals with consumers then you should review your standard contracts to ensure that there are no unfair terms. For further information or assistance to review your standard contracts please contact one of our Commercial partners:
The aim of the amendments is to address a perceived inequality of bargaining power between consumers and businesses. Consequently, the amendments only apply to so called ‘standard form consumer contracts’ such as mobile phone and gym membership agreements.
A consumer contract will be considered as being a ‘standard form’ if it is prepared by a business and is not subject to negotiation by the consumer – ie it is offered on a ‘take-it-or-leave-it’ basis. A consumer contract will be presumed to be ‘standard form’ unless the business can establish that this is not the case.
The amendments provide that a term of a consumer contract will be unfair if the term:
- would cause a significant imbalance in the parties’ rights and obligations under the contract;
- is not reasonably necessary in order to protect the legitimate interests of the business; and
- would be to the detriment of the consumer if the term was relied upon by the business.
What is an “unfair term” will need to be considered on a case-by-case basis. Consequently, many businesses could face considerable uncertainty from 1 July 2010. However, the amendments only apply to new standard form consumer contracts – ie contracts which are:
- entered into; or
- varied or renewed,
What Do I Need To Do?
If you run a business which deals with consumers then you should review your standard contracts to ensure that there are no unfair terms. For further information or assistance to review your standard contracts please contact one of our Commercial partners: