Provision

Commonwealth legislation

Victorian legislation

Definition of ‘unfair’.

A term of a standard form contract is unfair if:

• the term would cause a significant imbalance in the parties’ rights and obligations arising under the contract

• the term is not reasonably necessary to protect the legitimate interests of the party advantaged by the term.

A term in a consumer contract is to be regarded as unfair if in all the circumstances, it causes a significant imbalance in the parties’ rights and obligations arising under the contract to the detriment of the consumer.

Definition of ‘standard form contract’.

• None provided, but if a claimant states that a contract was a standard form contract, it is up to the respondent to prove otherwise

• There are certain matters that court must take into account when determining whether a contract is a 'standard form contract' including the bargaining power of the parties, when the contract was prepared, whether the contract was a 'take it, or leave it contract' and whether the terms were negotiated.

• A consumer contract that has been drawn up for general use in a particular industry, whether or not the contract differs from other contracts used in that industry.

• There is also a presumption that a contract is a standard form contract unless the contrary can be established.

Matters the court must take into account when determining whether a term is unfair.

Matters include:

• 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 clause was to be applied or relied on

• how transparent the clause is

• the contract as a whole.

None specified.

Matters the court may take into account when determining whether a term is unfair.

Whether the clause allows one party (but not the other) to:

• limit or avoid performance

• terminate the contract

• be penalised for breach of termination

• vary the terms of the contract

• renew or not renew

• vary the upfront price payable without the right of the other party to terminate

• vary the goods or services to be supplied or the land to be sold or granted

• unilaterally determine that a breach has occurred

• limit that party’s vicarious liability for its agents

• assign to that other party’s detriment without the other party’s consent

• limit one party’s right to sue

• limit the evidence one party can adduce in proceedings relating to the contract

• impose the evidential burden on the other party

Any other matters referred to in the regulations.

Whether the term was individually negotiated. 

Whether the term is prescribed by the regulations (none currently prescribed).

Whether the term has the object or effect of permitting the supplier to:

• avoid or limit performance

• terminate

• penalise the consumer for breach or termination

• vary the terms

• renew or not renew

• determine the price without allowing the consumer to terminate

• unilaterally vary the goods or services to be supplied

• limit vicarious liability for its agents

• assign the contract to the consumer’s detriment without the consumer’s consent

• limit the consumer’s right to sue

• limit the evidence the consumer can lead in proceedings

• impose the evidential burden on the consumer in court proceedings.

Effect if term is found to be ‘unfair’.

An unfair term of a standard form contract is void.

An unfair term in a consumer contract is unenforceable if the contract is a consumer credit contract and void if the contract is any other form of contract.

Prescribed unfair terms

None currently prescribed.

None currently prescribed.  It is an offence to use a prescribed unfair contract term.

Exceptions

Exceptions include:

• terms which define the main subject of the contract (i.e. a consumer cannot buy goods and then later assert that they changed their mind and it was unfair that they had to proceed with the purchase, or borrowed money and then later claimed it was unfair that the lender enforced the mortgage)

• terms which set the upfront price payable under the contract (ie the consideration for the supply or sale provided it is disclosed at or before the contract is entered into) but does not include amounts which are contingent on the occurrence or non-occurrence of an event

• terms required by law.

None specified. 

What contracts are impacted?

All standard form consumer contracts, being contracts for:

• the supply of goods or services, or

• a sale or grant of an interest in land;

to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption.

Contracts which on or after 1 January 2010 are:

• entered into

• renewed, in relation to conduct occurring after the renewal

• varied, in relation to conduct occurring after the variation.

All contracts to supply goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption, for the purposes of the ordinary personal, domestic or household use or consumption of those goods or services.

Contracts which on or after the day after the Bill receives royal assent are:

• entered into

• renewed.