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The Australian Consumer Law

Unfair Contract Terms

In March 2010 the first part of the Australian Consumer Law (ACL) was passed introducing a single national consumer law for all states and territories.  One of the most important consumer reforms of the ACL is the introduction of a national unfair contract terms law.

From 1 January 2011 the unfair contract terms law will provide the ACCC, ASIC and all state and territory consumer protection agencies with a method of dealing with problems that have developed from the use of standard form contracts.

While businesses may use standard terms in consumer contracts, the new laws are there to protect consumers who may suffer loss or detriment due to an imbalance in bargaining power.

Typically, standard form contracts are used in the supply of goods and services, eg:

• telecommunication providers
• finance
• motor vehicles
• gyms

What is unfair?

A term in a standard form consumer contract is unfair if:

• it would cause a significant imbalance  in the parties' rights and obligations arising under the contract; and
• it is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term and
• it would cause detriment (financial or otherwise) to a party if it were to be applied or relied on.

Only a court can determine if a term is unfair or not.  A term declared by a court to be unfair is not binding on the consumer.

(For more information see Section 3 of the consumer guide)

What is exempt?

Unfair contract terms law does not apply to the following terms of a standard form consumer contract:

• terms that define the main subject matter of a consumer contract
• terms that set the upfront price payable under the contract
• terms that are required or expressly permitted by a law of the Commonwealth, state or territory.

(For more information see section 2.1 of the consumer guide)

The following consumer contracts are excluded:

• certain shipping contracts
• contracts that are company constitutions, managed investment schemes or other kinds of bodies
• contracts covered by the Insurance Contracts Act 1984

(For more information see section 2.2 of the consumer guide)

Enforcement of the law

Enforcement of the unfair contract terms law will be shared between the ACCC, ASIC and state and territory consumer protection agencies who will work together to ensure a consistent approach to compliance and enforcement.

Individuals consumers can also commence private actions to enforce their rights under the law to recover loss or damage incurred. 

Only a court can determine whether a term to a standard form consumer contract is unfair however disputes may also be resolved through external dispute resolution schemes.

 (For more information see section 5 of the consumer guide)

Free publications and guides

• Audio - ACCC Unfair Contract brochure.mp3 (2.6 MB)
• A guide to the unfair contract terms law [ 33pages/435kb]

 You will need a PDF viewer such as Adobe Reader installed on your computer to view PDF documents.  Please contact us if you have difficulty viewing or printing the document.

Order printed copies of these guides by emailing consumer.affairs@justice.tas.gov.au

For more information go the ACCC website at http://www.accc.gov.au/content/index.phtml/itemId/930021