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The Trade Practices Amendments and Standard Form Contracts

The Australian Parliament will introduce significant changes to consumer protection laws of Australia, effective from 1 January 2011.

The first leg of these changes are contained in the Trade Practices Amendment (Australian Consumer Law) Bill (No. 1) 2009 (Cth), which was passed on 14 April 2010. The Trade Practices Amendment (Australian Consumer Law) Bill (No.2) 2010 is currently being considered by Parliament. Once both bills are passed, when combined they will constitute the new Australian Consumer Law (“ACL”).

The ACL is intended to impact consumer protection in Australia in many ways, including but not limited to, the following:

  1. replace a wide range of existing national and State and Territory consumer laws and will clarify understanding of the law for both Australian consumers and businesses;
  2. be applied as a law of the Commonwealth. Each State and Territory will also make the ACL a law of its jurisdiction so that the same provisions will apply across Australia
  3. implementation amendments to the consumer protection provisions of the TPA, including but not limited to amendments to legislative requirements and obligations regarding product safety standards, representations in negotiations between suppliers and consumers, consumer guarantees and unfair contract terms;
  4. change the name of the Trade Practices Act 1974 (2001) (Cth)  to the “Competition and Consumer Act 2010 (Cth);
  5. be administered by the Australian Competition and Consumer Commission and each State and Territory’s consumer law agency; and
  6. be generally reflected in similar provisions in the Australian Securities and Investments Commission Act 2001 (ASIC Act), so that financial products and services are treated in the same way.

Whereas most of the amendments will take effect from 1 January 2011, the new provisions governing unfair contract terms will be operative from 1 July 2010. These are the most prominent changes being introduced by the ACL.

Under the ACL, “unfair contract terms” are terms which:

  1. cause a significant imbalance in the parties’ rights and obligations arising under the contract;
  2. are not reasonably necessary to protect the legitimate interests of the supplier; and
  3. cause or are likely to cause financial or non-financial detriment to a party.

The provisions relating to unfair contract terms apply to standard form contracts, which are usually ‘fill in the blanks’ contracts that are given to consumers from a ‘take it or leave it’ position. Whilst standard form contracts are common practice as they aid in lowering the cost of doing business with large numbers of consumers, their provisions will now require careful scrutiny to ensure the terms do not breach the provisions of the ACL.

Whilst the provisions do not prohibit standard form contracts, in light of the new legislation it is clear that such contracts must be worded very carefully to avoid breach of the ACL. Contract terms in standard form contracts should only be included if they are necessary to protect the legitimate interests of the supplier. Moreover, the terms must not cause or be likely to cause detriment to consumers.

If a Court finds that a contract term is unfair, the consumer or consumers affected by the term may be awarded damages. Moreover, they may also have injunctions imposed upon them or be ordered to remedy the breach of the ACL (eg. by way of contract variations or refunds). Further, company managers may be disqualified from their positions as company office holders where they have acted without regard for the welfare of their consumers.

Conclusion

Businesses that rely on standard form contracts, particularly those which utilise internet based transactions are likely to feel the effect of the unfair contract provisions of the ACL the most. However, any organisation that uses standard form contracts will be affected by the new laws.

Given that the new unfair contract term provisions come into effect on 1 July 2010, it is recommended that businesses thoroughly examine their standard form contracts well before this date to ensure that they understand how the new provisions will have on their dealings with consumers, and to ensure that they are not at risk of breaching the ACL.

If you have any queries in relation to the changes to consumer protection laws to be introduced by the ACL and how you and/or your business may be affected, please contact Berrigan Doube Lawyers on (03) 9614 6677.