Unfair contract terms provisions introduced in July 2010 become part of the Australian Consumer Law (ACL) on 1 January 2011.
The law introduces national unfair contract terms, improving protection for consumers by removing unfair terms in standard form consumer contracts.
The law aims to reduce circumstances where consumers suffer a loss or other disadvantage due to unfair contract terms.
The law applies to new contracts entered into on, or after 1 July 2010 and terms of existing contracts renewed or varied on or after 1 July 2010.
The law applies to standard form consumer contracts. It does not apply to business-to-business contracts. Most insurance contracts are not covered.
Consumer contracts are contracts for the supply of goods and services, or for the sale or grant of an interest in land, to an individual for personal, domestic or household use.
Generally, a standard form contract is one that:
Consumers enter standard form contracts every day, typically for home loans, credit cards, mobile phones, gym memberships, travel and health insurance and utilities.
The law does not apply to:
Under the provisions, a term is unfair if the following three conditions are met:
In other words:
The law contains a list of the types of terms that may be considered unfair. Contracts can still include these terms, as they are not banned, but when used in certain circumstances they could be unfair. Some examples are:
Only a court or the Consumer, Trader and Tenancy Tribunal can decide if a term is unfair.
The court or Tribunal must consider:
If a court or Tribunal finds that a term is unfair, it is void. The term is treated as if it never existed and cannot be enforced or relied on. However, the contract will still bind the consumer and trader if it can operate without the unfair term.
If you think a term in your contract is unfair, you should first try to resolve the issue with the trader.
NSW Fair Trading, the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission can provide you with general information on the way the unfair contract terms law works.
If you have not been able to resolve a dispute over a contract for the supply of goods or services directly with the trader, you can lodge a complaint with NSW Fair Trading who then acts as an informal negotiator.
If the dispute is still not resolved, you may be able to make an application to the Consumer, Trader and Tenancy Tribunal.
A consumer can make application to the Supreme Court for a declaration that a contract term is unfair, but only with the leave of the Court. You should seek legal advice if considering this option.
NSW Fair Trading may seek the cooperation of business in removing terms that seem unfair, but it cannot make a decision that a term is unfair.
NSW Fair Trading can seek a declaration from the Supreme Court that a term in a standard form consumer contract is unfair.
A declaration binds all parties to consumer contracts of that kind, unless the Supreme Court orders otherwise.
A declared unfair term is void. A trader who tries to enforce a declared unfair term against a consumer is in breach of the Fair Trading Act. NSW Fair Trading may then apply to the Supreme Court for:
The following agencies will enforce provisions relating to consumer goods and services:
The Australian Securities and Investments Commission (ASIC) will enforce provisions relating to financial products and services.
For complaints and enquiries on consumer goods and services, contact:
NSW Fair Trading
Tel: 13 32 20
Website: www.fairtrading.nsw.gov.au through the Lodge a complaint form – applies to general complaint form and the Home building form.
For complaints and enquiries on financial contracts, contact:
Tel: 1300 300 630
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