Main Body

3.5 Other possible terms

A number of commentators in the field have discussed several other terms that may be found to be unfair under the unfair contract term provisions. The potentially unfair terms are outlined as follows.


3.5.1 Terms providing that the consumer understands the contract

Some commentators have suggested that terms under which consumers acknowledge they have read or understood the contract may be unfair.[1] These terms are quite often found in e-commerce transactions, where the consumer is required to check a box during the transaction confirming they understand the contract and have read the provisions.


Establishing whether a consumer has understood a contract is an objective matter and cannot be determined simply by requiring a consumer to acknowledge terms. Moreover, there is generally no legal advantage to this clause as the law has always regarded a person as being bound by a contract once they have executed it, regardless of whether they have read and understood the contract.


Notwithstanding the above, the clause may be unfair as it may create the perception in a consumer’s mind that there are no legal remedies available to them once they have agreed to such a term. Once again, the unfairness results from the consumer’s interpretation of the term, rather than the effect of the term at law.[2]


3.5.2 Terms requiring a majority deposit

It has also been suggested terms that require a deposit equal to a substantial part of the purchase price may be unfair. A deposit is an amount intended to ensure that the consumer is genuine in their intention to purchase, usually to provide ‘peace of mind’ to the supplier that they do not have to deal with other potential purchasers. A deposit is provided to cover costs in the supplier allocating resources to the contract and pay costs associated with the preparation of the contract. As a general rule, a supplier is allowed to retain a purchaser’s deposit if the consumer terminates the contract, provided that the deposit is a reasonable amount, regardless of the loss suffered by the supplier.


In contrast, a pre-payment should be refunded to the consumer under a contract, if the consumer opts out of the contract, save for any actual and reasonable losses suffered by the other party to the contract.


Notwithstanding this, commentators have argued that a clause that requires all or substantially all of the purchase price to be paid as a deposit may be found to be unfair, as it departs too significantly from the standard right of a consumer to pay on delivery and acceptance of the goods (or performance of the service).[3]


In the same vein, terms that require consumers to pre-pay for installation of goods are likely to be found to be unfair, as pre-payment monies are generally only paid to cover the initial costs of the supplier – such as obtaining materials.


These terms are likely to be found to be unfair as they reduce the consumer’s bargaining power in respect of legal recourse for breach of contract or defects in goods.

  1. Australian Consumer Law – Fair Markets, Confident Consumers (2009) Australian Treasury <> at 22 July 2010.
  2. Ibid.
  3. Ibid.


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Svantesson on the Law of Obligations Copyright © 2022 by Dan Svantesson is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License, except where otherwise noted.