Unfair Contract Terms - Industry Report

UNFAIR

CONTRACT

TERMS

www.accc.gov.au

ACCC Report

Industry review outcomes

March 2013

Unfair contract terms

Industry review outcomes

March 2013

Australian Competition and Consumer Commission

23 Marcus Clarke Street, Canberra, Australian Capital Territory 2601

Important notice

The information in this publication is for general guidance only. It does not

constitute legal or other professional advice, and should not be relied on as

a statement of the law in any jurisdiction. Because it is intended only as a

general guide, it may contain generalisations. Youshould obtain professional

advice if you have any speciﬁc concern.

The ACCC has made every reasonable effort to provide current and accurate

information, but it does not make any guarantees regarding the accuracy,

currency or completeness of thatinformation.

ACCC 02/13_628

Contents

Executivesummary 

 Introduction 

Theunfaircontracttermslaws 

Industryreviews 

 Issuesandoutcomes 

IssueContracttermsthatallowthebusinesstochangethecontractwithout

consentfromtheconsumer 

IssueTermsthatcauseconfusionabouttheagencyarrangementsthatapply

andseektounfairlyabsolvetheagentfromliability 

IssueTermsthatunfairlyrestricttheconsumer’srighttoterminatethe

contract 

IssueTermsthatsuspendorterminatetheservicesbeingprovidedtothe

consumerunderthecontract 

IssueTermsthatmaketheconsumerliableforthingsthatwouldordinarily

beoutsideoftheircontrol 

IssueTermsthatpreventtheconsumerfromrelyingonrepresentations

madebythebusinessoritsagents 

IssueTermsseekingtolimitconsumerguaranteerights 

IssueTermsthatremovetheconsumer’srighttoacreditcardchargeback

facilitywhenbuyingtheservicethroughanagent 

 Broaderconsumerconcerns 

Generalconsumerprotectionlaw 

Businessesoperatingonline 

Transparencyandaccessibility 

 Futureactions 

Unfair contract terms—Industry review outcomes

Executive summary

TheintroductionoftheAustralianConsumerLaw(ACL)representsthemostsigniﬁcant

reformtotheconsumerlawframeworkinAustraliasinceTheACLhasreplaced

numerousnationalstateandterritoryconsumerlawssimplifyingthelawandimproving

itsaccessibilityAspartoftheACLtheACCCgainedfurthertoolstohelpitrespond

swiftlyandappropriatelytobreachesofthelaw

TheACLincorporatesvariousprovisionstargetingspeciﬁcconsumerissuesincluding

provisionswhichrendervoidunfairtermsinstandardformconsumercontractsThe

ACCCreviewedstandardformconsumercontractsthroughthelensoftheseprovisions

intheairlinetelecommunicationsﬁtnessandvehiclerentalindustriesaswellassome

contractscommonlyusedbyonlinetradersAselectnumberofstandardformcontracts

usedbyprominenttravelagentswerealsoexamined

DuringthesereviewstheACCCidentiﬁedissuesunderbothunfaircontracttermlaws

andbroaderconsumerprotectionlawsTheACCCworkedwithbusinessestoremoveor

changeunfairtermsinstandardformcontractsandaddressidentiﬁedissues

Thisreportprovidesasummaryoftheoutcomesandﬁndingsofthereviewsnoting

whereissuesremain

Inmostcasesthebusinessesunderreviewchosetomakesigniﬁcantchangestosome

oftheirstandardformcontractsManybusinesseschosetodeleteoramendproblematic

termsThefollowingtypesoftermswereofparticularconcerntotheACCCduringthe

reviewsandthefocusofamendmentsandtheACCC’scollaborativecomplianceapproach

 Contracttermsthatallowthebusinesstochangethecontractwithoutconsentfrom

theconsumer

 Termsthatcauseconfusionabouttheagencyarrangementsthatapplyandthatseek

tounfairlyabsolvetheagentfromliability

 Termsthatunfairlyrestricttheconsumer’srighttoterminatethecontract

 Termsthatsuspendorterminatetheservicesbeingprovidedtotheconsumerunder

thecontract

 Termsthatmaketheconsumerliableforthingsthatwouldordinarilybeoutsideof

theircontrol

 Termsthatpreventtheconsumerfromrelyingonrepresentationsmadebythe

businessoritsagents

 Termsseekingtolimitconsumerguaranteerights

 Termsthatremoveaconsumer’screditcardchargebackrightswhenbuyingthe

servicethroughanagent

TheACCCfoundthatinthemajorityofindustriesreviewedmostbusinessestook

advantageoftheopportunitytoaligntheirstandardformcontractswiththenew

nationalunfaircontracttermsprovisionsoftheACLProblematictermswereidentiﬁed

andeitheramendedordeletedineachoftheeightcategorieslistedabove

Particularlysigniﬁcantchangeswereachievedinrelationtostandardformcontracts

ofmajorairlineswithofproblematictermsidentiﬁedbytheACCCamendedor

deletedasaresultofthereview

Unfair contract terms—Industry review outcomes

SomebusinesseshavenotfullycooperatedwiththeACCCduringtherevieworhave

chosennottochangetheirstandardformcontractstoaddressproblematicterms

thatwereidentiﬁedbytheACCCTheACCCisnowmovingfromacompliancetoan

enforcementresponsetoresolveoutstandingissues

MoregenerallythisreportmarksthepointatwhichtheACCCtransitionsfromitsinitial

compliancereviewfocustoamoreenforcementfocusedapproachtodealingwith

unfaircontractterms

TheACCCinvitesbusinessestoconsiderthetermsandconditionsoftheirownstandard

formcontractsinlightoftheACCC’sﬁndingsandtomakechangeswherenecessaryto

ensuretheircontracttermsarecompliantwiththeACL

Unfair contract terms—Industry review outcomes

1. Introduction

ThisreporthighlightstheoutcomesoftheACCC’sunfaircontracttermsreviewsincludingan

overviewofthekeyresultsItalsoidentiﬁesproblematiccontracttermsandrelatedpracticesthat

causeconcerntotheACCCandwhichmaywarrantfurtheractionsandinsomecasesthepossibility

ofcourtaction

TheACCCachievedsigniﬁcantimprovementstostandardformconsumercontractsinanumberof

industriesfollowingtheintroductionofnewprotectionsandenforcementtoolsundertheAustralian

ConsumerLaw(ACL)



TheACLhasbeenthemostsigniﬁcantAustralianconsumerlawreformina

generationreplacinggenericconsumerlawsacrossAustraliawithasinglenationalframework

AsapartoftheACLnationalunfaircontracttermslawscameintoeectonJuly



TheACCCreviewedstandardformcontractsintheairlinetelecommunicationsandvehicle

rentalindustriesidentifyingcontracttermswhichposedproblemsunderbothgeneralconsumer

protectionlawandthenewunfaircontracttermsprovisionsduringthesereviewsTheACCC

reviewedanumberofstandardformcontractsusedbyprominenttravelagentsTheACCCalsoled

anationalprojectwithConsumerAairsVictoria(CAV)toreviewstandardformconsumercontracts

commonlyusedbyonlinetradersandalsointheﬁtnessindustry

TheACCCdirectlyengagedwithbusinessestoaddressfairnessconcernsandtorestorebalancetoa

numberofimportantprovisionsinthosecontracts

StandardformcontractsarearegularfeatureinconsumertransactionsFormanybusinessesthey

governtherelationshipandarethemainplatformforinteractingwithcustomersClearsimple

consumercontractscanbuildafoundationforpositiverelationshipsTransparentcontracttermscan

beatoolforcommunicating‘headline’consumerinformationandhelpingconsumerstounderstand

thekeyaspectsoftheagreement

Goodcontracttermsoeranopportunityforbusinessestodealupfrontwithareasofconsumer

dissatisfactionanddisputetherebyreducingcomplaintsBusinessesworkingtoaligncontractswith

theACLunfaircontracttermsprovisionswillinmanycasesbeaddressingthesebroaderconcerns

TheACCChasavarietyofapproachesandtoolsatitsdisposaltoensurebusinessescomplywiththe

ACLDependingonthesituationandthedesiredoutcomestheACCCmaytakeenforcementaction

oralternativelyengagewithbusinessestoarticulateitsconcernsandtoprovideanopportunityfor

thebusinessunderreviewtoaddressthoseconcerns

DuringthisinitialphaseofreviewingunfaircontractprovisionstheACCCdecidedtodirectlyengage

withtherelevantbusinessestoidentifyandresolveissues

TheinitialcompliancereviewphaseoftheACCC’sapproachtoaddressingunfairstandardform

contracttermshasnowconcludedThisprocesshasenabledtheACCCtoidentifyproblematic

contracttermsandrelatedpracticesintheairlineonlineretailtelecommunicationsandvehicle

rentalsectorsandwithsomeprominenttravelagentsonlinetradersandbusinessesinthe

ﬁtnessindustry

OveralltheACCCfoundagoodlevelofcooperationfrombusinessesduringthereviewsleadingto

substantialchangesbybusinessestotheirstandardformconsumercontractsThisalsoledtosome

broaderimprovementstothegeneralbusinesspracticesinthesesectors

HoweversomebusinesseshavenotfullycooperatedwiththeACCCduringthereviewsorhave

chosennottochangetheirstandardformcontractstoaddressproblematictermsthatwere

identiﬁedbytheACCCTheACCCisnowconsideringwhetherfurtheractionsandinsomecasesthe

possibilityofcourtactioniswarrantedagainstbusinessestodealwithspeciﬁcprovisionsstillinuse

whichitconsidersmayoperateunfairly

1 The ACL is found in Schedule 2 of the Competition and Consumer Act 2010 (Cth).

2 Prior to 2010, Victoria was the only Australian jurisdiction to have unfair standard form consumer contract terms laws

in place. From 1 July 2012, federal government agencies were able to take action under the provisions. Other state and

territory authorities were not granted power under the unfair contract terms provisions until 1 January 2011.

Unfair contract terms—Industry review outcomes

The ACCC encourages businesses to review the terms and conditions of their own standard form

contracts in light of the ACCC’s ﬁndings, and to make changes where necessary to ensure terms are

compliant with the ACL.

The unfair contract terms laws

ThenationalunfaircontracttermslawscameintoeectonJulyPart–oftheACLprovides

acourtmaydeterminethatatermofastandardformconsumercontractisunfairandthereforevoid

UndertheACLa‘consumercontract’meansacontractforthesupplyofgoodsandservicesor

thesaleorgrantofaninterestinlandtoanindividualwhoacquiresitwhollyorpredominatelyfor

personaldomesticorhouseholduseorconsumption

Althoughtheunfaircontracttermsprovisionsdonotdeﬁnea‘standardformcontract’theyoutline

anumberoffactorsthatthecourtmusttakeintoaccountindeterminingwhetheracontractisa

‘standardformcontract’Inbroadtermsitwilltypicallybeonethathasbeenpreparedbyoneparty

tothecontractandisnotsubjecttonegotiationbetweentheparties–thatisitisoeredona‘take

itorleaveit’basis

Theunfaircontacttermslawsdonotapplytoacontracttosupplygoodsorservicesfromone

businesstoanotherforbusinessuse

SimilarunfaircontracttermsprovisionsexistundertheAustralianSecuritiesandInvestments

Commission(ASIC)Actinrelationtostandardformconsumercontractsforﬁnancialproducts

andservices

Atestconsistingofthreeelementsisusedtodeterminewhetheratermisunfair

Atermofaconsumercontractwillbeconsideredunfairif

 itwouldcauseasigniﬁcantimbalanceintheparties’rightsandobligationsunderthecontract

 itisnotreasonablynecessarytoprotectthelegitimateinterestofapartytothecontract

(notethatthepartywhowouldbeadvantagedbythetermmustprovethatitisreasonable

necessary)and

 itwouldcausedetrimenttoapartytothecontractifitweretobeappliedorreliedupon

AllthreeelementsofthetestmustbeprovedinorderforacourttoﬁndthatatermisunfairIn

determiningwhetheratermisunfairinaccordancewiththetestthecourtmusttakeintoaccount

theextenttowhichthetermistransparentandthecontractasawhole

Thelawsalsoprovideexamplesofthetypesoftermsthatmaybeconsideredunfairandprovide

aframeworkforassessingthetransparencyoftermsTermsthatsettheupfrontpriceandsubject

matterofacontractandtermsthatareexpresslyrequiredorpermittedbyanotherlawareexcluded

fromtheunfaircontracttermsprovisions

EnforcementoftheunfaircontracttermsissharedbetweentheACCCASICandthestateand

territoryconsumerprotectionagenciesIndividualconsumerscanalsoseektoenforcetheirrights

underthelaw

TheACCCASICandthestateandterritoryconsumerprotectionagenciesmayapplytothecourt

foradeclarationthatthetermofthecontractisunfairItisthentheroleofthecourttodetermine

whetherthisisthecase

Ifacourtmakesadeclarationthatatermisunfairandapartysubsequentlyseekstoapplyorrelyon

theunfairtermthecourtmaymakeordersincludingtovarythecontractsorarrangementsanorder

refusingtoenforceanyorallofthetermsofthecontractoranorderdirectingthepersontorefund

moneyorpropertytotheinjuredperson

FurtherguidanceabouttheunfaircontracttermslawsisprovidedintheAustralianConsumerLaw

publicationAguidetotheunfaircontracttermslaws



3 http://www.consumerlaw.gov.au/content/the_acl/downloads/unfair_contract_terms_guide.pdf

Unfair contract terms—Industry review outcomes

Industry reviews

TheaimsoftheACCCindustryreviewswereto

• evaluatecompliancewithunfaircontracttermslawsandbroaderACLrequirementsinkey

nationalindustriesbyidentifyingproblematiccontractsandcontracttermsaswellas

broaderconcerns

• workwithbusinesstoachievepositivechangestostandardformconsumercontractsandrelated

practicestobeneﬁtconsumers

Inidentifyingindustriesforthereviewsconsiderationwasgiventoarangeoffactorsincluding

relativelyhighlevelsofconsumercomplaintsfeedbackfromconsumerstakeholdersandpotential

forwidespreadconsumerdetrimentinparticularindustries

InadditiontotheACCC’sreviewsoftheairlinestelecommunicationsandvehiclerentalindustries

andsomeprominenttravelagenciestheACCCandCAVledanationalprojecttoidentifyunfair

contracttermsinonlineretailcontractsWithsupportfromstateandterritoryocesoffairtrading

thereviewassessedonlinestandardformcontractsusedbybusinessesoeringvariedproducts

andservicesAfterthisinitialassessmenttheACCCandCAVundertooktargetedengagement

withbusinesseswhosecontractswereidentiﬁedaspresentingthegreatestconcernsunderboth

theunfaircontracttermsprovisionsandtheACLgenerallyAllofthebusinessesengagedwith

duringtheACCCandCAVnationalprojectonbusinessesoperatingonlinerespondedreadilyto

concernsamendingproblematicclausesandensuringthattheircontractsweremorebalanced

andtransparent

TheACCCinvitesotherbusinessesoperatingintheonlinespacetoreviewtheirownstandardform

consumercontractsandmakeamendmentswherenecessarytoensuretheycomplywiththeACL

TheACCCandtheCAValsoworkedtogethertoreviewstandardformconsumercontractsinthe

ﬁtnesssectorasexplainedinmoredetailbelow

ThereviewshaveconcludedTheACCCisnowconsideringwhetherfurtheractionsandinsome

casesthepossibilityofcourtactioniswarrantedagainstbusinessesacrossallsectorstodealwith

speciﬁcprovisionsstillinusewhichremainasaconcerntotheACCCfollowingthesereviews

Unfair contract terms—Industry review outcomes

2. Issues and outcomes

TheACCCsoughttoachievepositivechangetostandardformconsumercontractsandidentiﬁed

eightkeyissuesduringtheindustryreviews

 Contracttermsthatallowthebusinesstochangethecontractwithoutconsentfrom

theconsumer

 Termsthatcauseconfusionabouttheagencyarrangementthatapplyandseektounfairly

absolvetheagentfromanyliability

 Termsthatunfairlyrestricttheconsumer’srighttoterminatethecontract

 Termsthatsuspendorterminatetheservicesbeingprovidedtotheconsumerunder

thecontract

 Termsthatmaketheconsumerliableforthingsthatwouldordinarilybeoutsideoftheircontrol

 Termsthatpreventtheconsumerfromrelyingonrepresentationsmadebythebusinessor

itsagents

 Termsseekingtolimitconsumerguaranteerights

 Termsthatseektoremovetheconsumer’srighttoacreditcardchargebackfacilitywhen

buyingtheservicethroughanagent

Theseissuesaroseinconsumercontractsindividualcontracttermsandrelatedbusinesspractices

Insomecasesthecontracttermsandassociatedpracticescausedconcernsacrossallofthe

reviewedindustriesInothercasesconcernswereconﬁnedtoaparticularindustry

Issue 1: Contract terms that allow the business to change

the contract without consent from the consumer

Termsthatallowonepartytovarythecontractduringitslifewithouttheconsentoftheotherparty

maybeconsideredunfairSuchtermsareparticularlylikelytobeunfairiftheyfailtoprovidean

accompanyingbalancingrightfortheotherpartytoconsenttoorrejectthechangeortoexitthe

contract



Howevertheinclusionofsuchabalancingrightmaynotinitselfbesucienttonegate

theunfairnessoftheterm

Suchatermcanresultinconsumercomplaintsifabusinessreliesonittochangeacontracttothe

detrimentoftheconsumerwithoutappropriatelycommunicatingtheexistenceofthetermorits

operationtotheconsumer

IntheindustriesreviewedtheACCCfoundthisissuemostprominentlyintelecommunications

standardformcontractsOfeleventelecommunicationsstandardformcontractsreviewedsix

includedtermsthatpurportedtoallowthebusinessestovarythecontractunilaterallyHowever

threeofthecontractscontainedtermsthatwerebalancedbyprovisionswhich

• allowedtheconsumertoexitthecontractintheeventofanunfavourablevariationor

• imposedarequirementonthebusinesstoobtainconsumerconsentpriortoeectingthechange

TheACCC’sworkwiththereviewedbusinessesledtoconsiderablepositivechangesinthesetypes

oftermsForinstanceTPGnolongerhasaproblematictermofthiskindrelatingtosubscription

feesinitscontracts(seeexamplebelow)Fourothertelecommunicationsbusinessesamendedtheir

termsasaconsequenceofthereviewsothatbalancingmechanismswereprovidedtomakethe

operationofthosetermsfairertotheconsumer

4 Australian Consumer Law, ss. 25(1)(d), (f) and (g).

Unfair contract terms—Industry review outcomes

ExampleHowwerecontracttermsthatallowthebusinesstochangethecontract

withoutconsentfromtheconsumeramendedtoaddresstheACCC’sconcerns?

TPG’sstandardformconsumercontractincludedatermenablingittovarythe

subscriptionfeeschargedtoconsumersforaservicewithoutprovidingnoticeThe

termwaswordedasfollows

Youmustpayallsubscriptionfeesapplicabletotheplanforwhichyouhaveregistered

Youunderstandthatallfeesandchargesmaybealteredfromtimetotimebyuswithout

noticehoweverwewillnotincreasethesubscriptionfeeforyourplanuntiltheendofthe

MinimumContractTerm

ThistermwasproblematicbecauseithadtheeectofpermittingTPGtochange

subscriptionfeespayableunderthecontractduringthelifeoftheagreementwithout

noticetotheconsumeroradequatebalancingprovisionsbeingincluded

FollowingdirectengagementwiththeACCCaspartofthesereviewsTPGagreedto

deletethesectionofthetermallowingforunilateralvariationofsubscriptioncharges

Theamendedtermnowreads

Youmustpayallsubscriptionfeesapplicabletotheplanforwhichyouhaveregistered

Failuretopaysubscriptionorusagechargeswillresultinthesuspensionorterminationof

yourservice

Insomecasesbusinessesclaimedthatthepracticalimplementationoftheidentiﬁedproblematic

clausesoperatedasthoughbalancingprovisionswereinplaceForexampleonebusinessallowed

consumerstoexitorchangedealswithoutpenaltyintheeventthatthebusinesschangesthefees

withouttheirconsentHoweverthisbusinesspracticewasnotincorporatedintoitsstandardform

contractTheACCCdoesnotconsiderthistobeasatisfactoryresponsebybusinesstotheconcerns

raisedTheACCCencouragesbusinessestoexpresslyincorporatethesepracticesintotheircontract

termstolimitconsumerconfusionandthepotentialforthemisuseoftermsallowingthebusinessto

changethecontractwithoutconsentfromtheconsumer

Intotalofthesixtelecommunicationsbusinessescontactedﬁveagreedtochangetheirtermsina

waythataddressedconcernsraisedbytheACCCduringthereviews

Thesetypesofproblematictermswerealsoidentiﬁedinseveralcontractsusedbybusinesses

tradingonlineManyonlineconsumertransactionsareone-oinnaturewitheachnewsalebeing

governedbyanewseparatecontractInthesecircumstancesitmaybereasonableforthestandard

tradingtermstobevariedfromtimetotimeprovidedthatthetermsthatappliedatthetimethe

contractwasenteredintoarenotHoweversomecontractsreviewedwereoverlybroadandfailed

tomakethisdistinctionItisimportantthatthetermsthatappliedatthetimeofthesalewillnotbe

variedbythebusinesswithouttheconsumer’sconsentduringperformanceofthecontract

Unfair contract terms—Industry review outcomes

ExampleHowshouldonlinecontracttermsthatallowthebusinesstochangethe

contractduringperformanceofthecontractwithoutconsentfromtheconsumerbe

amendedtoresolvetheACCCandCAV’sconcerns?

Problematictermsallowingthebusinesstoalterthetermsandconditionsduringthe

lifeofthecontractwereidentiﬁedinthestandardformcontractsofbusinessestrading

onlineForexamplethefollowingtermwasidentiﬁedasaconcerninthestandardform

consumercontractsusedbyamajoronlineretailer

Wemaychangeorupdatethiswebsiteandthetermsandconditionsatanytimewithout

providingyouwithpriornotice

Theretailerhasnowamendedthisprovisionprovidingforduenoticetobegivento

consumershoweverthoseamendmentshavenotresolvedtheACCC’sconcernin

relationtochangesbeingmadetothetermsandconditionsafterthesaleisconcluded

Wemaychangeorupdatethiswebsiteandthetermsandconditionsatanytimebygiving

younoticeasoutlinedbelow(byemailconventionalmailorbypostingitontheretailer’s

website)

Whensimilarconcernswereraisedwithotheronlinebusinessestheirgeneralapproach

wastoresolvetheseconcernsbyamendingsuchtermstoprovidebalancetothe

contractasfollows

Forfutureordersthesetermsmaybedierentandsowerecommendyoureadthese

termscarefullyeachtimeyouagreetothemduringtheorderingprocess

Wewillnotchangeanytermsandconditionsforanexistingorderthathasbeenaccepted

byusthetermsandconditionsthatwillapplytotheorderarethetermsandconditions

thatappliedatthetimeyouplacedtheorder

Issue 2: Terms that cause confusion about the agency arrangements

that apply and seek to unfairly absolve the agent from liability

ThestandardformcontractsofsomeprominenttravelagencieswerereviewedbytheACCC

Someofthetermsofthosecontractswereambiguousanddidnotclearlyexplaintheagency

arrangementsthatappliedbetweenthetravelagencyandtheproviderofthetravelservices(such

astheairlinesandhotels)andalsodidnotmakeclearwhichpartywasliableforanyfailuretosupply

thetravelservicestotheconsumer

FollowingengagementbetweenatravelagencyandtheACCCthisbusinesshasnowchangedits

standardformcontractstomakeitclearthatitactsinthecapacityofanagentonbehalfofathird

partytravelproviderandthatitacceptsliabilitywherethefailuretosupplythetravelservicesarises

fromitsownfailuretoprovidetheagencyservicesPutsimplythistravelagenthasclariﬁedthatit

willacceptliabilitywhereitisatfaultthroughitsownactions

TheACCCwillcontinuetopursuethisconcernwithothertravelagenciesuntilasatisfactory

outcomeisachieved

Unfair contract terms—Industry review outcomes

Issue 3: Terms that unfairly restrict the consumer’s

right to terminate the contract

Termsthatseekto‘lockin’consumerstolongtermcontractscanbeproblematicwhenabusiness

fallsshortofdeliveringonthecontractfailstoliveuptoconsumerexpectationsorhaspoorlevelsof

customerservice

Contracttermsthatpermitorhavetheeectofpermittingoneparty(butnotanotherparty)to

terminatethecontractcanbeunfair



ascancontracttermsthatpenaliseorhavetheeectof

penalisingoneparty(butnotanotherparty)forbreachorterminationofthecontract



Theyare

alsoinconsistentwiththeconsumerguaranteelawsundertheACLandarelikelytoleadtoconfusion

onthepartoftheconsumerabouttheirrightsunderthoselaws

MostbusinessesrespondedtotheACCC’sconcernsbyalteringtheircontractstoremoveoramend

problematictermsofthistype

AspartofbroaderimplementationactivitiestheACCCandCAVreviewedcontractsoeredina

rangeofsectorsincludingtheﬁtnessretirementvillagesandsolarpanelsindustriesProblematic

terminationclauseswereevidentintheseindustriesForexample

• Solarpanels—theACCCidentiﬁedproblematicterminationclausesthatsoughttoholdconsumers

tothecontractafterinstallationhadstartedevenifthebusinesshadfailedtodeliveron‘essential’

elementsofthecontractUndersomeofthesetermsaconsumercouldonlyseekredressby

pursuingcommonlawdamages–ratherthanhavingtheoptiontosimplyendthecontract(see

examplebelow)

• Fitnesscentres—ACCCandCAVanalysisfoundthatconsumerstendedtoraiseconcernsabout

earlyterminationfeesafterenteringintolongtermcontractsnotfullyappreciatingeitherthe

durationofthecontractorthepracticaleectofexitandterminationclauses-untiltheysought

toendtheagreement

Followingdirectengagementwithﬁtnesscentressomebutnotallhaveimplementedchanges

toensurethattheconsumerismadeawarebeforeenteringintothecontractoftheexactduration

ofthecontractandtheeectoftheexitandterminationclauses

Anotherissueraisedwastheoftenunnecessaryandburdensomeobstaclesimposedon

consumerstoexercisetheirrightstoterminatethesecontractssuchastheonerousrequirement

ofneedingtoattendinpersonattheﬁtnesscentretoﬁrstmeetface-to-facewithstabeforethe

consumerisentitledtobringthecontracttoanendManybusinesseshavenowamendedtheir

contractstoremovesuchproblematicterms

5 Ibid, s. 25(1)(b).

6 Ibid, s. 25(1)(c).

Unfair contract terms—Industry review outcomes

ExampleHowwere‘lockin’contracttermissuesaddressed?

Priortothereviewasolarpanelcompanyprovidedcustomerswiththerighttocancel

thecontractprovidedtheinstallationofthesolarequipmenthadnotcommenced

Howeverthisrighttoterminatewasnotsetoutclearlyinthetermsandconditionsand

consumerswererequiredtoimplythisfromatermwhichprovidedasfollows

ClauseYoumaynotcancelorotherwiseterminatetheAgreementorrevoke

anyauthoritygivenunderitafterwecertifythattheInstallationoftheservices

hascommenced

TheACCCraisedtheissueofthelackofclaritywithrespecttothistermThebusiness

agreedtoamenditstermsandconditionstoexpresslystatethatconsumerswere

entitledtoterminatetheagreementatanytimebeforetheinstallationhadcommenced

bygivingdaysnotice

TheACCCraisedafurtherissuewiththebusinessaboutClauseTheACCCwas

concernedthisprovisionsoughtto‘lockin’consumersduringtheinstallationprocess

eveniftherewasamajorfailuretocomplywiththeconsumerguaranteesthatapply

undertheACL

FollowingdirectengagementbytheACCCaspartofthisreviewthebusinessretained

thisconditionassetoutinClausebutagreedtoaddafurthertermtomakeit

cleartoconsumersthatthisconditionwassubjecttotheirconsumerguaranteerights

torejectthegoodswhereamajorfailuretocomplywiththeautomaticconsumer

guaranteesundertheACLoccurred

ClauseFortheavoidanceofdoubtnothinginthisAgreementaectsyourrightsto

terminatethisAgreementintheeventthatyourejectthegoodsundersectionofthe

AustralianConsumerLaw

SectionoftheACListheconsumerguaranteesprovisionthatapplywithrespectto

thesupplyofgoods

Issue 4: Terms that suspend or terminate the services

being provided to the consumer under the contract

Undertheunfaircontracttermslawscourtsmayconsidertermsallowingthebusinesstosuspendor

terminatethecontractunfairparticularlywherethey

• permitorhavetheeectofpermittingoneparty(butnotanotherparty)toavoidorlimit

performanceofthecontract



or

• permitonepartytodecidewhetherthecontracthasbeenbreachedwithouttheotherparty

havingrecourseorarighttorespond



TheACCCislikelytoviewsuspensionandterminationclausesasproblematicif

• thebusinessdoesnotconsidertheimpactontheconsumerbeforeseekingtorelyontheterm

• thebusinessseekstosuspendorterminatetheservicewithoutnoticeoranypriorcommunication

withtheconsumeror

• thetermdoesnotprovideanaccompanyingrightfortheconsumertoseekaremedysuchasa

refundorcancellationofthecontract

TheACCCfoundthatthesetypesoftermswereaconcernacrossindustriesreviewed

7 Ibid, s. 25(1)(a).

8 Ibid, s. 25(1)(h).

Unfair contract terms—Industry review outcomes

FourtelecommunicationsbusinesseswerefoundbytheACCCtobeusingstandardformcontracts

containingproblematicsuspensionandterminationclausesEngagementwiththesebusinesses

revealedtheirintentionstorelyonthetermsinconﬁnedcircumstancesonlyForexampleto

preventaconsumerfromusingtheserviceforfraudulentpurposestoon-sellaconsumerservice

forcommercialgainortosupportspammingandillegalactivityHoweverthetermsasdrafted

werebroadlyapplicableandcouldimpactonanynumberofconsumersnotengagedinillegalor

otherwiseprohibitedactivity

TheACCCachievedsigniﬁcantchangesbyengagingwithbusinessesonthisissueInresponsetothe

ACCC’sconcernsallfourtelecommunicationsbusinessesamendedordeletedtheproblematicterms

toeitherconﬁneoperationtointendedpurposesorprovidegreatertransparencyaboutpractical

intentandthecircumstancesinwhichthebusinesswouldseektorelyonthetermTheboxbelow

providesanexample

ExamplesHowdidbusinessesseektoaddresstheACCC’sconcernsaboutterms

providingforthesuspensionandterminationofservices?

PriortotheACCC’sreviewthestandardformconsumercontractusedbya

telecommunicationsproviderTPGgavethebusinessabroadrighttosuspendor

disconnectthecustomer’saccesstoanyaspectoftheserviceatanytimeandwithout

noticetotheconsumerThetermwaswordedasfollows

Wemayatanytimewithoutnoticeandatourabsolutediscretionsuspendordisconnect

youraccesstopartoralloftheserviceordeleteordenyyouaccesstoyourdataifwe

havereasonablecausetodoso

Thistermdemonstratedaseriouslevelofnon-complianceinthatitgaveonepartyto

thecontractbroadpowerstoterminatethecontractwithoutanybalancingrightsbeing

providedtotheotherpartyInresponsetodirectengagementbytheACCCwithTPGit

agreedtodeletethisterminfull

Telstra’sstandardformconsumercontractscontainedaprovisionwhichconferreda

broaddiscretiononTelstratocancelorsuspendservicesintheeventof‘excessiveor

unusualuse’AsaresultofdirectengagementbytheACCCwithTelstrathestandard

formconsumercontractswereamendedtoprovideadeﬁnitionof‘excessiveand

unusualuse’whichsatisfactorilyaddressedtheACCC’sconcernsaboutthisclauseand

providedgreatertransparencytotheconsumeraboutwhenTelstra’srightsunderthis

clausewouldbeexercisedtocancelorsuspendtheservices

Termsenablingabusinesstoavoiditscontractualobligationsbycancellinganorderwerefoundin

thecontractsofbusinessesoperatingonlineOnoccasiontherewillbeanunanticipateddemandfor

productsbeyondthebusiness’availablesupplyHoweverthisdoesnotpermitabusinessoperating

onlinetoexcludeitscontractualobligationstoconsumers

Unfair contract terms—Industry review outcomes

ExampleHowdidonlinebusinessesseektoaddresstheACCC’sandCAV’s

concernsabouttermsenablingthebusinesstoavoiditscontractualobligationsby

cancellingorders?

Termsthatrefertoprovidingrefundsofanyacceptedpaymentsimplythatabusiness

maycancelanorderafteraconsumerhaspaidforit

ifyourorderisrejectedorisnotacceptedwewillprovideafullrefundofany

paymentreceived

Businessessoughttoaddressconcernsraisedaboutthesetypesofclausesby

amendingtheircontractstoincludebalancingprovisionsenablingtheconsumerto

cancelthecontract

Youmaycancelanorder(whetheritisacceptedbyusornot)bycontactingourClient

CentrepriortothedispatchofthatorderOncancellingtheorderwewillrefund

yourpayment

DespitethoseamendmentstheACCCwillremainconcernedifbusinessesrelyonsuch

clausesseekingtoexcludetheircontractualobligationstoconsumerswheresuch

conductgivesrisetobaitadvertisingwhichisspeciﬁcallyprohibitedundertheACL

Issue 5: Terms that make the consumer liable for things

that would ordinarily be outside of their control

TheACCCindustryreviewsfoundthatcertaintermsinstandardformconsumercontractsoperated

inwaysthatheldconsumersresponsibleforthingsthatwouldordinarilybeoutsideoftheircontrol

Forexample

• Intheonlinesectorsomebroadlydraftedtermssoughttoexemptthebusinessfromliability

forerrorsorinaccuraciestheywouldotherwiseberesponsibleforwhilemakingtheconsumer

responsibleforensuringinformationprovidedtothemwascorrect

• Sometermsidentiﬁedinthetelecommunicationsindustrypurportedtorequiretheconsumerto

payforallchargesanduseoftheirserviceregardlessofwhethertheyauthorisedthatuseornot

TheACCCandCAVengageddirectlywithbusinessesoperatingonlineinrelationtoclauses

thatraisedconcernsbystatingthatitwastheresponsibilityoftheconsumertoensureproduct

informationprovidedbythebusinessiscorrectEachbusinesscontactedchosetoamendthe

problematicclausestoprovidemorebalance

TheACCCraisedconcernsdirectlywithfourmajortelecommunicationsbusinessesinrelationto

thesetypesofprovisionsThreeoutofthefourbusinesseschosetoamendordeletetheirterms

toprovidegreatertransparencytoconsumersabouttheoperationofthesetermsSomechanges

includedadditionalguidanceforconsumersabouthowtomitigateagainsttheriskofunauthorised

useoftheservicesOnebusinessmadeitclearthatconsumerliabilitydidnotextendtocharges

incurredasaresultofamistakeonthepartofthebusiness

TheACCCalsoraisedconcernswithmanyofthemajorhirecarcompaniesexaminedduringthe

reviewNoneofthebusinessesadequatelyaddressedtheconcernsraised

Unfair contract terms—Industry review outcomes

Issue 6: Terms that prevent the consumer from relying on

representations made by the business or its agents

Broadlydraftedclausesthatseektoabsolveabusinessofresponsibilityforstatementstheyortheir

agentsmaketoconsumersmaybeunfairTheACCCachievedimportantcomplianceoutcomes

byengagingwithbusinessesonentireagreementclausesexceptinthecaseofthevehicle

rentalindustry

Thesetypesoftermscanleadtoasigniﬁcantimbalanceintheparties’rightsandobligationsand

canpotentiallyconfuseandmisleadconsumers

TheACCCfoundthistypeofproblematictermtobeanissueinallindustriesreviewedespeciallyin

thetelecommunicationsindustryDuetothelengthandcomplexityoftelecommunicationsstandard

formcontractsconsumersoftenrelyheavilyonverbalrepresentationsmadeatthepointofsale

toformtheirunderstandingofthedealbeingoeredAtermenablingabusinesstodisclaimany

responsibilityfortheserepresentationsisunfair

TheACCCraisedconcernsdirectlywithfouroftheeleventelecommunicationsbusinessestwoof

ﬁveairlinesandtwooutofninevehiclerentalcompaniesFollowingengagementwithbusinesses

whosestandardformcontractscontainedproblematictermsofthisnaturethemajorityof

reviewedbusinessesagreedtodeletetheseclausestoaddressACCCconcernsAnexampleofa

telecommunicationsbusiness’contractiscontainedbelow

ExampleHowweretermspreventingtheconsumerfromrelyingonrepresentations

madebythebusinessoritsagentsdealtwithduringtheACCCreviews?

PriortotheACCCreviewonetelecommunicationsbusinessDodocontainedthe

followingterminitsstandardformconsumercontract

Youacknowledgethatyouenterintothisagreemententirelyasaresultofyourown

enquiriesandthatyoudonotrelyonanystatementrepresentationorpromisebyusor

onourbehalfnotexpresslysetoutinthisagreement

TheACCCconsideredthatthisclausedemonstratedsigniﬁcantnon-compliancewith

thelawFollowingdiscussionswiththeACCCDododeletedthetermfromitsstandard

formcontractinfull

Signiﬁcantoutcomeswereachievedinthetelecommunicationsanddomesticaviationindustries

withalmostallcompaniesagreeingtoamenddeleteorotherwiseresolvetheissue

Threeofthefourtelecommunicationsbusinessesagreedtoamendordeleteproblematicentire

agreementdisclaimerterms

Bothairlinesalsoagreedtoamendordeletetheidentiﬁedtermsfollowingnegotiationswith

theACCC

Thetwovehiclerentalcompaniesdeclinedtoamendordeleteproblematictermsidentiﬁedby

theACCC

Unfair contract terms—Industry review outcomes

Issue 7: Terms seeking to limit consumer guarantee rights

Thereviewsidentiﬁedanumberofcontracttermsacrossindustriesthatsoughttolimitconsumer

rightstorefundsorwarrantiesInsomecasesthesetermsmisledconsumersastotheirrightsunder

theconsumerguaranteesprovisionsoftheACL

TermsthatrestrictconsumerrightstorefundsorwarrantiesinwaysthatbreachACLconsumer

guaranteesprovisionsraisebothunfaircontracttermsconcernsandbroaderACLissues

Problematictermswereidentiﬁedinonlineretailandthetelecommunicationssector

TwoonlinebusinessescooperatedwiththeACCCduringthereviewprocessandresolvedthe

concernsabouttheseproblematictermsbychangingtheircontractstoalignwiththeremedies

availabletoconsumersundertheconsumerguaranteeprovisionsoftheACL(seeexamplebelow)

TheACCCalsohighlightedtheseconcernswithanumberoftelecommunicationsbusinessesEachof

themeitheramendedordeletedthetermwhichislikelytogreatlyreducetheriskofthoseprovisions

misleadingconsumersastotheirconsumerguaranteerightsundertheACLAnexampleissetout

belowillustratinghowTPGrespondedpositivelytotheconcernsaboutthistypeofprovisionas

raisedbytheACCCduringitsreview

ExamplesHowwereACCC’sconcernsabouttermsseekingtolimitconsumer

guaranteesaddressedduringthereviews?

OnetelecommunicationsbusinessTPGcontainedthefollowingproblematicterminits

standardformconsumercontractpriortotheACCCreview

Allothertermsconditionswarrantiesundertakingsinducementsandrepresentations

whetherexpressorimpliedrelatingtothesupplyoftheserviceandequipment

areexcluded

ThroughdirectengagementwithTPGaspartofthereviewtheACCCraisedconcernsthat

thisprovisionwouldoperatetoexcludeaconsumer’srightsundertheconsumerguarantees

provisionsoftheACLConsequentlyTPGdecidedtodeletethistermaltogether

PriortotheACCCreviewanonlineretailerUniversalMusiccontainedthefollowing

provisionsinitsstandardformconsumercontract

Clause(para)TothefullestextentpermittedbylawUniversaldisclaimsall

representationsandwarrantiesexpressorimpliedincludingbutnotlimitedtoimplied

warrantiesofmerchantabilityandﬁtnessforaparticularpurposeandnon-infringement

Clause(para)Youunderstandacknowledgeandagreethatyouareassumingthe

entireriskastothequalityaccuracyperformancetimelinessadequacycompleteness

correctnessauthenticitysecurityandvalidityofanyandallfeaturesandfunctionsof

GetmusictheWebsiteandContent

Theseprovisionscontainedoverlybroadstatementsaboutlimitationsofliabilityby

purportingtoplacetheentireonusofriskontheconsumerandnoneonthebusiness

TheseprovisionswereinconsistentwiththeconsumerguaranteeprovisionsoftheACL

FollowingaletterbytheACCCUniversalMusicsoughttoaddresstheseconcernsby

amendingthesetermstoexpresslyacknowledgethatUniversal’sliabilitytotheconsumer

inrelationtothesupplyofserviceswassubjecttotheACLandanyliabilitysoughttobe

excludedbythisprovisiondidnotapplywheretherehadbeenafailurebyUniversalMusic

tocomplywithaconsumerguarantee

Unfair contract terms—Industry review outcomes

Issue 8: Terms that remove the consumer’s right to a credit card

chargeback facility when buying the service through an agent

Whengoodsorservicesarepurchasedusingcreditcardstheconsumerenjoysthebeneﬁtofa

chargebackfacilityAchargebackisareversalofacreditcardtransactionAconsumermayhave

chargebackrightswhentheymakeapurchaseusingacreditcardandsomethinggoeswrongsuch

astheydonotreceivethegoodsorwhattheyreceiveisnotwhatwasdescribed

AsaresultofacompliantreceivedfromChoicetheACCCexaminedastandardformconsumer

contractusedbyatravelagencywhichsoughttoremoveaconsumer’screditcardchargeback

rightswhenbuyingthetravelservicesthroughtheagency

AsaresultofChoice’sfocusontheissueanddirectengagementbytheACCCthistravelagency

hasagreedtodeletetheseprovisionsfromthestandardformcontractsmeaningthatallconsumers

buyingtravelservicesthroughthisagencywillnowhavethebeneﬁtofthecreditcardchargeback

facilityfullyrestored

WhentheACCCcontactedFlightCentreaboutthissameissueitexplainedthatitscontractswere

amendedinAugusttoremovethoseprovisions

Unfair contract terms—Industry review outcomes

3. Broader consumer concerns

General consumer protection law

TheACCCreviewsidentiﬁedissuesinvariousindustriesthatwerebeyondthescopeoftheunfair

contracttermslawsbutraisedconcernsundergeneralconsumerprotectionlawandotherlaws

Someoftheseconcernswereaddressedbybusinessesduringthereviewprocess

Forinstanceinthedomesticaviationindustrythreebusinessesincludedtermsintheirstandard

formcontractsallowingthemtousecustomer’spersonaldetailsforabroadrangeofreasonsnot

strictlylinkedtothesupplyofservicesAfternegotiationswiththeACCConebusinesschoseto

amendtheidentiﬁedtermtolimititsoperationsothatitcompliedwiththeACLTheothertwo

businesseswereabletodemonstratethatthetermsaswordedcompliedwithotherindustry-

speciﬁcstatutoryrequirementsandconsequentlydidnotrequireamendment

AnumberofbroaderACLissuesinthevehiclerentalindustrywereidentiﬁedasaresultofthe

ACCCreviewThecompaniesapproachedhavenotaddressedthoseconcernsTheseACLissues

remainofconcerntotheACCCandwillbepursuedgoingforwardEnforcementactionwillbetaken

ifwarranted

Businesses operating online

InrelationtobusinessesoperatingonlinetheACCCandCAVfoundthatsomebusinesses’standard

formcontractscontainedclausesthat

• seektolimitthejurisdictionbywhichthecontractisgovernedandunderwhichtheconsumer

canbringanactionincourt

• seektograntirrevocableperpetualandroyalty-freerightstoabusinesstousetheconsumer’s

correspondenceorothercommunicationsforanypurpose

OverallallbusinessescontactedbytheACCCandCAVduringtheonlineindustryreviewchoseto

addressconcernsbyamendingtheirclausestobebetterbalancedandmoretransparent

Transparency and accessibility

DuringtheindustryreviewstheACCCalsoobservedanumberofcomplexandlengthycontracts

thathamperedtransparencyandaccessibilityTheUCTframeworkprovidesforcourtstoconsider

thecontractasawholeandthedegreeoftransparencyinparticularterms

FollowingconsultationwiththeACCCanumberofbusinessesrespondedpositivelytoconcerns

raisedandchosetoamendcontractstoimproveaccessibility

ForinstanceTelstrawasoneoftheﬁrstbusinessestodevelopaone-pagesummaryforconsumers

oftelecommunicationsservicesalbeitconnectedwiththedevelopmentofaconsumerprotection

industrycodeapplyingtothisparticularindustryOthercompaniessoonfollowedsuitTheACCC

encouragesthefurtherdevelopmentofeasytoreadandunderstandpointofsalematerialfor

consumerswhichwillassistthemtomakeeectivecomparisonsbetweendierentproductsbeing

oeredandalsotoallowthemtocomparetheproductofonetelecommunicationsprovideragainst

thatoeredbyanother

Aselectnumberofcontractsusedbytravelagentswerealsofoundtohavesigniﬁcantissueswith

respecttothetransparencyofthosecontractsandthelackofplainEnglishusedinthemBothof

thesefeaturesmakeitdicultforconsumerstounderstandthecontractualarrangementsthatthey

arerequiredtosignuptowhenusingatravelagent

Unfair contract terms—Industry review outcomes

AsaresultoftheACCC’sdirectapproachonetravelagencyhasundertakentochangetheir

contractstomakethemmoretransparentandtouseplainEnglishinthedraftingofthemtomake

themeasierforconsumerstoreadTheACCCwillcontinuetoreviewthechangesmadetocontracts

usedbytravelagentsuntilitissatisﬁedthatthenecessaryimprovementshavebeenmade

TheACCCinvitesbusinessesgenerallytoconsideropportunitiesforreducingthelengthand

complexityoftheirstandardformconsumercontractstoimprovetransparencyandaccessibility

Unfair contract terms—Industry review outcomes

4. Future actions

ItispleasingfortheACCCtoreportthatmanyofthereviewedbusinesseschosetomake

improvementstotheirstandardformcontracttermsbyamendingordeletingtheproblematic

termsraisedbytheACCCduringitsreviewImportantlymanybusinesseswerealsopreparedto

makebroaderimprovementstotheirgeneralbusinesspracticesinsomeofthesesectorswhichwill

enhancetheexperienceofconsumerswhenbuyingcertaingoodsandservices

DuringthisnextphasetheACCCwillconsiderunresolvedissuessuchasthosenotedinthevehicle

rentalindustryfromanenforcementperspectiveTheACCCisnowconsideringwhetherfurther

actionsandinsomecasesthepossibilityofcourtactioniswarrantedagainstbusinessestodealwith

speciﬁcprovisionsstillinusewhichtheACCCregardsasoperatingunfairly

Nowisagoodtimeforbusinessesacrossallsectorstoundertakeacomprehensivereviewoftheir

standardformconsumercontractsandmorebroadlytheircustomerhandlingprocessesand

practicestoensurethatthecontractualarrangementsinplacewiththeircustomersareconsistent

withthenewnationalunfaircontractprovisionsSuchareviewwillalsoallowbusinessestoensure

thattheirgeneralcustomerhandlingprocessesandpracticespromoteconductbythebusinessona

daytodaybasiswhichiscompliantwiththebroaderconsumerprotectionprovisionsoftheACL

Unfair contract terms—Industry review outcomes

ACCC contacts

ACCC Infocentre: business and consumer inquiries: 1300 302 502

Website: www.accc.gov.au

Translating and Interpreting Service: call 13 1450 and ask for 1300 302 502

TTY users phone: 1300 303 609

Speak and Listen users phone 1300 555 727 and ask for 1300 302 502

Internet relay users connect to the NRS (see www.relayservice.com.au and ask for 1300 302 502)

ACCC addresses

Nationaloce

MarcusClarkeStreet

CanberraACT

GPOBox

CanberraACT

Tel

Fax

NewSouthWales

LevelPittStreet

SydneyNSW

GPOBox

SydneyNSW

Tel

Fax

Victoria

LevelTheTower

ElizabethStreet

MelbourneCentral

MelbourneVic

GPOBox

MelbourneVic

Tel

Fax

Queensland

Brisbane

LevelGeorgeStreet

BrisbaneQld

POBox

GeorgeStreetPostShop

BrisbaneQld

Tel

Fax

Townsville

SuiteLevel

SuncorpPlaza

–SturtStreet

TownsvilleQld

POBox

TownsvilleQld

Tel

Fax

SouthAustralia

LevelGrenfellStreet

AdelaideSA

GPOBox

AdelaideSA

Tel

Fax

WesternAustralia

rdﬂoorEastPointPlaza

AdelaideTerrace

PerthWA

POBox

EastPerthWA

Tel

Fax

NorthernTerritory

LevelNationalMutualCentre

CavenaghSt

DarwinNT

GPOBox

DarwinNT

Tel

Fax

Tasmania

LevelCollinsStreet

CnrCollinsandArgyleStreets

HobartTas

GPOBox

HobartTas

Tel

Fax

Unfair contract terms—Industry review outcomes