There are a number of limitations of the application of s. 23. As a general proposition, terms that govern the primary subject matter of the contract will be excluded from the provisions.

These limitations are set out in s. 26 as follows:

The effect of each limitation is discussed in turn.

3.2.1 Terms that define the main subject matter of the contract

On the introduction of the ACL, commentary to the Act outlined that the main subject matter of a contract refers to the goods or services (including land, financial services or financial products) that the consumer is acquiring under the contract. The main subject matter may also include a term that is necessary to give effect to the supply under the contract that without which the supply could not occur.^[1]

Terms that define the main subject matter of the contract have been excluded from the unfair contract provision terms as a result of the VCAT decision of Director of Consumer Affairs Victoria v Craig Langley Pty Ltd & Matrix Pilates and Yoga (Pty Ltd) (Civil Claims).^[2] The Tribunal held that the terms defining the main subject matter of a consumer contract will invariably be the subject of genuine negotiation and therefore will be excluded from unfair contract term provisions.

Member Harbison stated:

“[T]erms of a consumer contract which have been the subject of genuine negotiation should not be lightly declared unfair. This legislation is designed to protect consumers from unfair contracts, not to allow a party to a contract who has genuinely reflected on its terms and negotiated them, to be released from a contract term from which he or she later wishes to resile.” ^[3]

3.2.2 Terms that set the ‘upfront price’ payable under the contract

Further to the above, the upfront price is the amount that the consumer agrees to pay in consideration for the contract, and challenging this term is excluded from the protection of s. 23. The upfront payment price is excluded from the unfair contract provisions, as it would be contrary to general contract law to allow parties to a contract to challenge easily understood upfront prices payable.^[4]

Section 26(1)(b) does not extend, however, to fees levied as a consequence of an event occurring during the period of the contract; where these fees are not necessary for the provision of the supply or sale under the contract but are additional to the upfront price. The upfront price will not include terms that impose additional fees for a default or exit, over and above the price for the goods or services acquired.^[5] As a result, these terms could be challenged under s. 23.

Regarding s. 26(1)(b), it is worthwhile remembering that s. 48 of the ACL imposes an obligation regarding businesses to provide a single price and will apply alongside the unfair contract term provisions.

3.2.3 Terms that are required or permitted by law

There are many terms expressly permitted to be included in a contract as a matter of public policy and may be necessary to ensure the validity of specific transactions. An example of such a term can be found in s. 139A of the CCA, which states that a term of a contract for the supply of recreational services will not be void by reason that the term excludes, restricts, or modifies the implied warranties in Subdivision B of Division 1 of Part 3-2 of the ACL relating to warranties in relation to the supply of services.