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Trade Practices Amendment
(Australian Consumer Law) Bill 2009

Introduction

On 24 June 2009, the Federal Government introduced the Trade Practices Amendment (Australian Consumer Law) Bill 2009 into Parliament. The Bill will implement the first phase of a single national consumer law to be known as the Australian Consumer Law. In doing so, it will amend both the Trade Practices Act 1974 and the Australian Securities and Investment Commission Act 2001.

The key features of the Australian Consumer Law are its provisions regulating unfair contract terms. It has also introduced new civil penalties, enforcement powers and consumer redress options.

The Bill became effective nationally on 1 January 2010. Stage two of the Australian Consumer Law has been introduced on 17 March 2010 through a second Bill, which will amend and transfer the existing consumer protection provisions to the Australian Consumer Law and establish a unified national product safety regulatory structure.

The Australian Consumer Law will be fully implemented by 1 January 2011.

Unfair Contract Terms

Under the current Bill, an unfair contract term in a standard form consumer contract will be rendered void. However the contract itself will continue if it is capable of operating without the unfair term.

The provisions apply to standard form consumer contracts entered into after 1 January 2010. Such contracts entered into before that date will only be subject to the provisions if they are renewed or varied on or after that date.

For this reason, it is essential to exercise caution when renewing or varying existing contracts.

In determining if the provisions of this Bill will apply to your contract, you must consider whether your contract is a standard form consumer contract. You can use the information below as a general guideline when making this determination.

Is it a Consumer Contract?

A 'consumer contract' is defined as a contract for:

  1. the supply of goods or services; or
  2. a sale or grant of an interest in land;

to an individual wholly or predominantly for personal, domestic or household use. Examples of such contracts include those with consumers for utility services, banking and financial services, and residential tenancies.

Pending a review of the unconscionable conduct provisions of the Trade Practices Act 1974 and the Franchising Code of Conduct, non-consumer contracts have been removed from the scope of the Bill.

Is it a Standard Form Contract?

In order to prevent parties from structuring their contractual arrangements in ways that would avoid the provisions, the Bill does not provide a definition for 'standard form contracts'. Consequently, a presumption exists that a contract is a 'standard form contract' unless the respondent is able to prove otherwise.

The Court is required to take into account certain matters when determining whether a contract is a 'standard form contract', including whether:

  1. one party has more bargaining power than the other;
  2. the contract was prepared by one party prior to discussions with the other party;
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  3. the terms were negotiated; and
  4. the terms are specific to the transaction.

Are there any Unfair Contract Terms

A contract term is 'unfair' where:

  1. the term would cause a significant imbalance in the parties' rights and obligations arising under the contract; and
  2. the term is not reasonably necessary to protect the legitimate interests of the party advantaged by the term.

In determining whether a contract term is unfair, the Court may consider any matter that it deems relevant. However it must take into account:

  1. the extent to which the term would cause, or whether there is a substantial likelihood that the term would cause, detriment (whether financial or otherwise) to a party if the term is to be applied or relied on;
    the transparency of the term; and
  2. the contract as a whole.

The Bill lists contract terms that may be unfair. These include terms which permit the supplier to unilaterally:

  1. avoid or limit performance of the contract;
  2. terminate the contract;
  3. vary the terms of the contract;
  4. renew or not renew the contract; and
  5. vary the characteristics of the goods or services supplied under the contract.

The Bill also provides that the regulations may prescribe prohibited contract terms. However at present, the regulations do not contain such provisions.

Recommended Action

If you or your business use standard form consumer contracts, it is important to review their terms to ensure compliance with these new provisions. If you are an individual who believes that your contract is covered by the Bill and you require a legal understanding in relation to it, please do not hesitate to contact us.

Please be advised that this article is not intended to be legal advice. All advice Berrigan Doube Lawyers provides is tailored to our client’s needs and therefore our advice is on a case-by-case basis after having consideration of our client’s circumstances.