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When is a contract “unfair”?

Consumer Law News | October 2013

Small business owners are often provided with “standard contracts” by the “big end of town, namely large corporations. The small business owner may feel powerless to ask for changes to that contract where the terms seem unfair. The Australian Competition and Consumer Commission (ACCC) is making these types of unfair contracts a target for their blitz on enforcing the unfair contract terms provisions in the Australian Consumer Law [Schedule 2 of the Competition and Consumer Act] which were introduced in 2010. The first test case for the new laws was the case of ACCC v. Bytecard Pty. Ltd. FCA VID301/2013 which was settled with a consent judgement in July 2013. One of the unfair terms examined by the court was the term which allowed Bytecard to unilaterally vary its prices without prior notice to the customer. The terms also included a minimum contract period and customers were required to pay out the contract if they terminated early.  Does this sound familiar?  The questions asked by the Court included the question of fairness to the customer, where the customer was not provided with the opportunity to negotiate a change in price or entitled to terminate the contract. The response to these anomalies is to balance such unilateral terms with a right to accept or reject the changes or to exit the contract without a penalty.

The other common objectionable clause in the Bytecard clause was the “blanket” indemnity that Bytecard sought from the customer. Bytecard sought the customer to indemnify Bytecard from what appeared to be every conceivable claim for damage from every conceivable source, including causes completely outside the control of the customer! This case was ultimately settled and declarations being imposed on Bytecard, but the court did make clear that there was little chance that Bytecard could possibly claim that these clauses protected a legitimate interest of Bytecard’s. These are types of unfair terms that the Act is required to stamp out to create a better balance in bargaining power between the “big boys” and small business consumers.

Forum Law can advise and assist you in reviewing your contracts and transaction processes and documentation. If you are concerned about transactions where you may have been disadvantaged, we can advise and assist you with your concerns and any potential claim. 

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