Main Body
3. Unfair Contract Terms under ACL s. 23
This Chapter addresses the provisions of the Competition and Consumer Act 2010 (Cth) that govern unfair contract terms.[1] These provisions are contained within Part 2-3 of the Australian Consumer Law and allow consumers, and small businesses, a right of remedy in the event that a standard form contract contains terms that are unfair or prejudicial to the consumer or the small business.
Section 23 of the Australian Consumer Law was arguably one of the most significant changes that was implemented by the ACL as compared to the TPA that preceded it.
Section 23 provides as follows:
Australian Consumer Law, s. 23
(1) A term of a consumer contract or small business contract is void if:
(a) the term is unfair; and
(b) the contract is a standard form contract.
(2) The contract continues to bind the parties if it is capable of operating without the unfair term.
(3) A consumer contract is a contract for:
(a) a supply of goods or services; or
(b) a sale or grant of an interest in land; to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption.
(4) A contract is a small business contract if:
(a) the contract is for a supply of goods or services, or a sale or grant of an interest in land; and
(b) at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and
(c) either of the following applies:
(i) the upfront price payable under the contract does not exceed $300,000;
(ii) the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000.
(5) In counting the persons employed by a business for the purposes of paragraph 4(b), a casual employee is not to be counted unless he or she is employed by the business on a regular and systematic basis.
Importantly, the unfair contract provisions apply equally to contracts in all forms, including written and oral, online, over the phone and face-to-face. The provisions introduced by the ACL are generic consumer protection laws, in that they provide consumers with a right to take legal action in response to the harm they suffer as a result of the conduct of the business.
It is also worth noting that the unfair contract terms provisions contained in the ACL are also included in Part 2, Division 2, Subdivision BA of the Australian Securities and Investment Commission Act 2001 (Cth) (“ASIC Act”), with respect to financial products and services. As these provisions relate to financial products this will not be discussed further here. However, as the wording in the ASIC Act is substantially the same, it would be reasonable to assume that the principles and cases discussed in this chapter could apply equally in the enforcement of the ASIC Act.
The unfair contract provisions previously only applied to consumer contracts, which meant business-to-consumer transactions were captured but business-to-business transactions were not. However, both s. 23 ACL and the unfair contract provisions in the ASIC Act were amended in 2015 to extend its application to small business contracts,[2] recognising that many small businesses are provided with standard form contracts on a ‘take-it-or-leave-it’ basis.
