1.1 Background

1.2 Recent developments

2.1 Australia

2.1.1 Unconscionablity

2.1.2 Contracts Review Act 1980 (NSW)

2.1.3 Uniform Consumer Credit Code

2.1.4 Fair Trading Amendment Act 2003 (Victoria)

2.1.5 Non-government intervention

2.2 United Kingdom (and the European Union)

2.2.1 Supply of Goods (Implied Terms) Act 1973

and Unfair Contract Terms Act 1977

2.2.2 Unfair Terms in Consumer Contracts

2.3 Other overseas jurisdictions

2.3.1 New Zealand

2.3.2 United States

2.3.3 Canada

2.3.4 Thailand

4.1 Option 1: No additional regulation

4.2 Option 2: Self regulation

4.3 Option 3: The UK model and variants

4.4 Option 4: Contracts Review Act 1980 (NSW)

4.5 Option 5: Composite model

5.1 Overview

5.2 Unconscionability and B2B

5.3 Contracts Review Act 1980 (NSW)

5.4 Should unfair terms provisions apply to B2B?

SCHEDULE UK model and variants in detail 56

A EU CLAB database data

B UK Statistics – OFT UK

C Unfair Contract Terms Act B.E. 2540 (1997) Thailand

D Contracts Review Act 1980 (NSW)

E Uniform Consumer Credit Code

F Fair Trading Act 1999 (Victoria) Part 2B

G Unfair Terms in Consumer Contracts

Regulation 1999 (UK)

H UK Statistics – non-UK OFT

It was reported to the Ministerial Council on Consumer Affairs (MCCA) in August

2002 that fair trading and consumer protection jurisdictions across Australia share a

growing number of problems with unfair terms in consumer contracts in various areas

of the marketplace. Consumer contracts are increasingly complex and it is becoming

correspondingly difficult for consumers to identify important terms, rights and

responsibilities and potential costs associated with purchase agreements. New

technologies and borderless markets further complicate the picture.

At its 2002 meeting MCCA therefore directed the Standing Committee of Officials of

Consumer Affairs (SCOCA) to establish a national working party to investigate

policy options to address unfair terms in consumer contracts and the merits of

adopting a more nationally consistent and effective regulatory regime.

Currently, Queensland and Victoria jointly chair the Unfair Contract Terms Working

Party (the Working Party). All State and Territory fair trading agencies are

represented, together with nominees from Commonwealth Treasury, the Australian

Competition and Consumer Commission and the Australian Securities and Investment Commission.

The Working Party reported back to the 2003 MCCA meeting. MCCA agreed to its

recommendation that a national regulatory response to unfair contract terms through

consistent State and Territory legislation be developed subject to the completion of a

Regulatory Impact Statement confirming the need for such regulation.

The purpose of this Discussion Paper (the Paper) is to seek the views of the wider

community on the need for unfair contract terms regulation and the best model for

achieving this.

Part A of the Paper considers the nature and incidence of unfair contract terms, and

current responses to the problem as identified in Australia and overseas, in particular,

the European Union and the United Kingdom.

Part B of the Paper considers five options with respect to unfair contract terms,

including the model from the United Kingdom which has influenced provisions

recently enacted into the Victorian Fair Trading Act 1999. It also discusses whether,

unfair terms regulation should extend to business to business transactions.

From the end of Part A of the Paper, respondents are asked to address key issues.

However, respondents are encouraged to raise any other matters that they consider

relevant to the debate. A Questionnaire located after the Appendices incorporates all

the questions in the Paper.

In April 1995, the Commonwealth, State and Territory Governments signed a set of

agreements to implement National Competition Policy (NCP). Under NCP, each

participating jurisdiction committed to implementing a series of competition reforms,

including the review and reform, where necessary, of all legislation which contained

provisions restricting competition. Each jurisdiction also agreed to subject all new

legislative proposals that contained measures restricting competition to a public

benefit test (PBT).

The guiding principle for the NCP review of legislation is that legislation should not

restrict competition unless it can be demonstrated that:

the benefits of the restriction to the community as a whole outweigh the costs; and

the objectives of the legislation can only be achieved by restricting competition.

The Paper identifies the costs and benefits of each option to regulate unfair contract

terms. Feedback is sought on the options and the preliminary analysis of the

identified costs and benefits of each option. A final PBT Report, which will

incorporate all stakeholder feedback, will then be prepared and released.

In addition to each State and Territory’s NCP obligations, a Regulatory Impact

Statement (RIS) must be prepared on any proposed nationally agreed legislation. The

Paper will form the basis of the RIS. The cost-benefit analysis may be amended to

reflect any information gained through consultation and there may be a need for

further targeted consultation on the options to meet the RIS requirements.

Consultation with stakeholders is an integral part of the policy development process

and of both the NCP/RIS processes. Regulation of unfair contract terms would apply

across the marketplace. It will therefore be relevant to all consumers, businesses,

industry bodies and representative groups as well as MCCA/SCOCA and all State and

Territory fair trading agencies.

The Paper is available from the Queensland Office of Fair Trading and MCCA

websites. State and Territory fair trading agencies in the other jurisdictions will place

the Discussion Paper on their sites or provide information and appropriate reference

on how to access the Paper. All jurisdictions will also be able to distribute hard copies

on request for those who cannot access the Paper electronically.

Letters will be sent to industry bodies and representative stakeholder groups to alert

them to the Paper. Advertisements will be placed in newspapers in each State and

Territory.

Meetings with local stakeholders (eg industry and consumer groups) will be

conducted by State and Territory agencies in their jurisdictions, at the discretion of the

agency.

After analysing submissions, the Working Party will draft the final RIS/PBT Report,

based on the material in the Paper, incorporating the feedback on the outcome of

consultation.

The contents of submissions made to the Unfair Contract Terms Working Party may

be discussed in the final Report, which will be made publicly available. Submissions

may also be subject to Freedom of Information and other laws, which should be taken

into consideration when making submissions.

• by post to:

Unfair Contract Terms Working Party

Office of Fair Trading

Policy and Legislation Division

GPO Box 3111

BRISBANE QLD 4001

Marked ‘For the attention of Janet Wight’

(Telephone: 07 3119 0012)

• by facsimile to:

Unfair Contract Terms Working Party

Office of Fair Trading

Policy and Legislation Division

Marked ‘For the attention of Janet Wight’

07 3119 0019

• by email to

uct_submissions@dtrft.qld.gov.au

Queensland and Victoria jointly chair the Unfair Contract Terms Working Party (the

Working Party) which was set up in late 2002 by the Standing Committee of Officials

of Consumer Affairs (SCOCA) at the direction of the Ministerial Council on

Consumer Affairs (MCCA).  All State and Territory fair trading agencies are

represented on the Working Party, together with nominees from Commonwealth

Treasury, the Australian Competition and Consumer Commission and the Australian

Securities and Investments Commission.

The Working Party is investigating the need for nationally consistent regulation of

unfair terms in contracts and the best model to achieve this if a need should be

demonstrated. The purpose of this Discussion Paper (the Paper) is to seek the views of

the wider community on these issues.

Part A of the Paper considers the nature and incidence of unfair contract terms, and

current responses to the problem as identified in Australia and overseas, in particular,

the European Union and the United Kingdom. This discussion is intended to inform

answers to the questions as to whether regulation of unfair contract terms is necessary,

and if so, what model of regulation would be appropriate.

For the purposes of this Paper, unfair contract terms are those terms in a contract

which are to the disadvantage of one party but which are not reasonably necessary for

the protection of the legitimate interests of the other party.

The Paper notes that standard form contracts, in particular, are problematic. There is

little, if any real freedom of choice or negotiation of terms.

The United Kingdom Office of Fair Trading and the Australian Consumers’

Association both report that that the use of unfair terms is increasingly widespread

and crosses all types of industry – mobile phones, vehicle hire, home improvements,

software sales, package holidays, air travel, and financial services to name a few.

In Australia, there has been some ability for relief in relation to unfair contracts by

way of ‘unconscionable conduct’ both at common law and the broader protection

afforded by the Commonwealth Trade Practices Act 1974 as mirrored in State and

Territory fair trading legislation. New South Wales has its Contracts Review Act 1980

and the Uniform Consumer Credit Code also includes an ability to review unfair

contracts in a very similar manner to the Contracts Review Act.

The courts have tended to require that there must be some aspect of procedural

unfairness (a problem surrounding the circumstances leading up to and at the time of

the making of the contract) for a successful court action; that is, there is a reluctance

to find a term unfair in itself (substantive unfairness). In addition, the remedy is on a

case by case basis. There is currently no effective mechanism to effect systemic

changes of practice in the marketplace (except possibly in Victoria - see below).

Victoria has recently amended its Fair Trading Act 1999 to include provisions on

In the overseas context, the Paper discusses the UK model and, more briefly, the

situation in New Zealand, the United States, Canada, and Thailand.

This review of the incidence of unfair contract terms and their management to date

indicates that:

• the issue of unfair terms in contracts is a phenomenon experienced in many

countries including Australia;

• unfair terms are commonly found in a diverse range of industry types across

the marketplace;

• to date, Australian law has responded to unfair contracts which have an

element of procedural unfairness, that is, where the circumstances leading up

to and at the time of the making of the contract create unfairness;

• under the current legal regimes in Australia, the courts have been reluctant to

find unfairness solely on substantive grounds, that is, on the basis that the

unfairness of the actual terms of the contract leads to an injustice; and

• there is no effective Australia-wide mechanism to promote systemic changes

in the marketplace.

Part B of the Paper considers five options with respect to unfair contract terms:

Territory fair trading statutes) and section 70 Uniform Consumer Credit Code. In New

South Wales, subject to its review, the CRA would continue to apply, and in Victoria

the new provisions in relation to unfair contract terms in its Fair Trading Act 1999

will be taking effect.

This would allow self regulation by business and industry through mechanisms such

as guidelines or voluntary codes.

This model and its variants prohibit the use of unfair terms in consumer contracts and

provide a mechanism for determining whether a term is unfair. There is provision for

not only individuals to take action but also for fair trading agencies to deal with unfair

terms systemically. The Victorian variation also allows for a ‘black list’ of terms

which will be regarded as unfair and for prosecution for use of such terms.

The NSW Contracts Review Act 1980 (CRA) provides a mechanism for individual

consumers to take action with respect to unjust contracts and for the State fair trading

agency to take systemic action.

10

This model considers using those provisions from the CRA which address issues of

concern prior to and at the time of making the contract and the aspects from the UK

model and variants which consider the actual unfairness of the term itself. It would

allow for both an individual and systemic response to unfair contract terms.

Nil impact in terms of cost of

compliance and enforcement.

Lower levels of confidence in

the marketplace because of

consumer concern at not

knowing their liabilities under

contracts and/or being forced to

accept unfair terms and

therefore continued pressure

from consumers to intervene.

Nil impact in terms of

compliance.

There would be inconsistencies

between the States and

Territories legislative responses

(for example, the CRA in NSW,

unfair terms provisions in the

Victorian Fair Trading Act)

which may create uncertainty

for business.

Lower levels of confidence in

the marketplace because of

consumer concern at not

knowing their liabilities under

contracts and/or being forced to

accept unfair terms.

Consumers will continue to find

themselves being taken by

surprise, either financially due

to extra charges or by

discovering that effectively they

bear most, if not all, of any risk.

Suppliers will continue to have

rights without either

corresponding rights being

given to the consumer or

appropriate boundaries being

placed on the exercise of the

supplier’s rights.

Consumers will continue to bear

the cost individually of unfair

terms which are likely to be in

all contracts of a similar nature

or relating to the same industry

and also the cost of challenging

such terms. As a result, many

consumers will not complain

and therefore bear the cost of

the unfairness of the term.

Some consumers may not be

aware that they have rights

which are enforceable because

the contracts purport to deny

them these rights.

Nil impact in terms of cost of

compliance and enforcement.

Lower levels of confidence in

the marketplace if consumers

cannot be confident that selfregulation

is working.

Higher levels of confidence in

the industry or business if it can

show that self regulation is

One-off cost of re-drafting

contracts and staff training.

Cost of development of the

mechanism chosen for self

regulation and possible cost in

administering and ensuring

compliance, depending on the

mechanism.

Possible imbalance across the

Self regulation requires

commitment from all market

participants and this may be

difficult to achieve since unfair

contract terms involves most, if

not all, market segments. It

therefore may not address

reduced consumer confidence in

the marketplace

addressing consumer detriment

reducing pressure from

consumers to intervene.

marketplace as not all

businesses or industries may

participate

Higher levels of confidence in

the industry or business if it can

show that self regulation is

addressing consumer detriment.

There would be limited benefit

to consumers if the detriment

caused by unfair terms was only

addressed by some businesses

and some industries.

Cost involved in regulation may

be significant. However, it could

be argued that this can be used

as a co-regulatory option, as in

practice in the UK, court costs

have been avoided by

negotiating with business.

By following the Victorian

provisions which allow for some

clauses to be prescribed, more

certainty would be created for

business and there will be less

need to negotiate on all terms.

Higher levels of consumer

confidence across the

marketplace as consumer

detriment capable of being

addressed in a systemic manner.

One-off cost of re-drafting

contracts and staff training.

Once contracts are acceptable,

there would be no further

compliance work required.

A reduction in consumer

complaints could be expected

and therefore dispute resolution

costs; consumers should better

understand their rights and

obligations; and therefore make

more informed choices.

Higher levels of consumer

confidence across the

marketplace.

All businesses would be subject

to same requirements therefore

no inequity between businesses

or industry.

The ability to have unfair terms

addressed systemically, either

by government negotiation or

action in relation to a business

or industry or by prescribing

certain terms as unfair would

reduce the cost on individual

consumers in addressing the

matter.

The detriment to consumers

would also be addressed more

swiftly and across the

marketplace.

There may be increased costs to

consumers where business has

kept prices low by the use of

unfair terms. However, this may

be balanced out by the extra

costs and risks consumers would

otherwise have borne as a result

of the unfair terms.

Is a comparatively low cost

method of addressing unfair

contracts (compare UK

provisions which are resource

intensive for Government) as

responsibility for enforcing the

legislation is the responsibility

of the courts at the instigation of

the consumer.

Changing behaviour is slow

because of the reliance on

consumer initiated, individual

action.

There is a cost in the allocation

of resources in terms of the

May create uncertainty for

business as to whether contracts

would be challenged.

There are costs to business

where terms are challenged by

consumers.

Is compatible with UCCC

therefore providing a level of

uniformity.

Consumers are provided with a

mechanism which allows them

to take action in the situation of

an unjust contract. Court

decisions may also have a

deterrent impact on business.

This may have lead to a

decrease in the use of such

contracts and an increase in

consumer confidence in the

market.

Courts are requiring an element

of procedural unfairness for a

successful action. Likelihood of

success where only the term

court and legal systems to

enable consumers to pursue an

action.

Provides a mechanism for

addressing unjust contracts

systemically. However, there is

a question over its effectiveness

to date.

Is compatible with UCCC

therefore providing a level of

uniformity.

itself is unfair appears small.

There are costs to individual

consumers in taking court action

which will then only impact on

their particular case. Costs

incurred by business in

challenges may be passed on to

consumers generally.

Changing business behaviour on

a case by case basis is often a

slow process.

Provides a mechanism for

addressing unjust contracts

systemically. However, there is

a question over its effectiveness

to date.

Government would not be

responsible for procedural

unfairness as this would still be

for the individual consumer to

take action.

Cost involved in regulation of

substantive unfairness may be

significant. However, in practice

in the UK, court costs have been

avoided by negotiating with

business.

By following the Victorian

provisions which allow for some

clauses to be prescribed, more

certainty would be created for

business and there would be less

need to negotiate on all terms.

Higher levels of consumer

confidence across the

marketplace.

Since this model would provide

greater clarity and align with the

UCCC provisions in relation to

the procedural aspects, it should

create more certainty for

business.

One-off cost of re-drafting

contracts with respect to

substantive issues and staff

training. Once contracts are

acceptable, there is no further

compliance work required.

A reduction in consumer

complaints could be expected

and therefore dispute resolution

costs; consumers should better

understand their rights and

obligations; and therefore make

more informed choices.

Higher levels of consumer

confidence across the

marketplace.

All business would be subject to

same requirements therefore no

inequity between businesses or

industry.

Consumers would retain the

ability to take action on

procedural unfairness but there

would be greater clarity. There

would also be greater certainty

for consumers who only had

substantive issues to pursue.

The ability to have unfair terms

addressed systemically, either

by government negotiation or

action in relation to a business

or industry or by prescribing

certain terms as unfair would

reduce the cost on individual

consumers in addressing the

matter.

The detriment to consumers

would also be addressed more

swiftly and across the

marketplace.

There may be increased costs to

consumers where business has

kept prices low by the use of

unfair terms.

The Working Party considered it useful to look at the UK model in some detail. It

addresses the issue of substantive unfairness, which is proving to be problematic in

the Australian context, and has been used as a model for the recent amendments to the

Victorian Fair Trading Act 1999. The Working Party also considered the changes

which the Victorian provisions make to the model and posited additional changes.

The detailed discussion around the model and the relevant variations is contained in

the Schedule at the end of Part B.

Standard form contracts are widely used in transactions between business entities for

the supply of goods and services (described as “business to business” or B2B). These

contracts pose problems similar to those affecting contracts between business and

consumers (consumer contracts). Prohibiting terms in consumer contracts while

allowing identical terms in B2B contracts may put small businesses at a disadvantage.

It is argued, on the other hand, that B2B contracts are of a more commercial character

and there may be a greater opportunity and capacity for business to negotiate terms.

The question may be whether the protections afforded by unfair terms regulation

should only cover ‘small business’.

The costs and benefits of covering B2B are generally similar to those for

business/consumer contracts. However, this would be affected by whether or not B2B

contracts are regulated in exactly the same way as business/consumer contracts and

the degree to which government might intervene in this situation.

From the end of Part A of the Paper, respondents are asked to comment on the key

issues, including the preliminary cost benefit analysis, however, respondents are

encouraged to raise any other matters that they consider relevant to the debate. There

is a Questionnaire at the end of the Paper, for the assistance of respondents, which

incorporates all the questions in the Paper.

This part considers the nature and incidence of unfair contract terms and current

responses to the problem as identified. This discussion is intended to inform answers

to the questions whether regulation of unfair contract terms is necessary, and if so,

what model of regulation would be appropriate.

In the broad, unfair contract terms for the purposes of this Discussion Paper (the

Paper) would be those terms in a contract which are to the disadvantage of one party

the protection of the legitimate interests of the other party (usually the supplier).

For example, the general terms and conditions in a holiday package contract which:

• fail to make clear what was included in the price of the holiday and what the

consumer is expected to pay for at the resort;

• grant the supplier the right to alter most aspects of the holiday without notice;

• exclude liability for failing to honour verbal and written representations made

by anyone other than the supplier;

• make the sending of the holiday confirmation by Special Delivery

compulsory, thereby acting as an unfair and unnecessary formality

requirement;

• make the consumer liable for significant charges in excess of the cost of the

holiday in the event of cancellation but fail to notify the consumer of the

existence of these charges from the outset;

• suggest that the taking of the supplier’s travel insurance is compulsory;

• use legal terms inappropriately and in a manner which may be misleading.

In relation to a car hire contract:

• allows a limitation on mileage to be imposed during the rental period;

• contains an excess mileage charge which is a potentially an unfair financial

burden;

• allows for recovery for loss and damage from both the consumer and under the

damage protection programme;

• contains an interest rate which has the potential to act as a financial penalty;

• has the potential to bind the consumer to the terms and conditions of the

supplier’s insurance and damage protection programme, which the consumer

has not had a real opportunity to become acquainted with before being bound;

• allows supplier to claim damages from the consumer for failure to meet the

conditions of the agreement without any reference to reasonableness or the

duty to mitigate its loss;

• gives the supplier the right to re-possess the vehicle without any qualification

on the exercise of the right.

In relation to a phone contract:

• authorises the supplier to complete, on behalf of the purchaser, any part of the

form not completed by the purchaser and the purchaser agrees to be bound by

the completed form as if the purchaser had completed all parts of the form

before signing it;

• provides for certain additional terms to apply to special promotions and offers

of other products accepted by the purchaser but such terms are only made

available on the request of the purchaser;

• allows the supplier to vary charges or rates or charge the purchaser any taxes

or duties imposed in relation to the services at any time without prior notice to

the purchaser;

• allows the supplier to impose a credit limit on the purchaser’s account and/or

requires the payment of a security deposit or interim payment at the supplier’s

sole discretion and at any time.

In these situations, the detriment to the purchaser of the goods or service is that they

may find themselves subject to extra charges, or effectively bearing most, if not all, of

any risk. Rights are given to the supplier without either corresponding rights being

given to the purchaser or appropriate boundaries being placed on the exercise of the

supplier’s rights.

The purchaser may consider that a certain product is good value for the price, but this

may have been achieved by the inclusion of onerous terms, which, in the end, may

prove a greater cost to the purchaser.

This results in an unbalanced relationship. Purchasers also find themselves in the

position that they may not have fair and reasonable access to goods and services in the

marketplace. Even if they are aware of terms which are significantly to their

disadvantage, a supplier may not provide them with the goods or services they are

seeking unless they are prepared to agree to such terms. Generally, suppliers do not

compete on terms and therefore the purchaser may not be in any better position by

going to another supplier.

The policy objective is to increase fair and reasonable access to goods and services for

purchasers by reducing the presence of unfair contract terms in the marketplace. In

achieving this objective, due regard will be had to the principle that total benefits

should exceed total costs.

16

However, this philosophy implies that the parties are able to negotiate on an equal

footing, have equal bargaining power, are equally able to look after their own interests

and have a full understanding of the consequences of their actions and the terms of the

contract. In reality, this may not always be the case.

Lack of true consent has been addressed over time through the development of the

common law principles of illegality, incapacity, duress, undue influence, mistake,

misrepresentation and deceit. The acknowledgement of the existence of “harsh and/or

unconscionable” contracts can be traced back to seventeenth century England where

relief was sought with respect to “catching bargains with expectants”, that is, where

heirs of noble families entered contracts to borrow money against their future

unconscionable conduct, of which unconscionable contracts are one aspect, has

developed since that time and has also been incorporated into statute law in Australia.

This is discussed in more detail below.

In more recent times, it is the development of the standard form contract which has

become the focus of allegations of unfairness. The use of standard form contracts was

a consequence of the industrial revolution with its exponential growth in the mass

production of goods and the provision of services. Businesses with a large number of

customers clearly found it more convenient to have a pre-printed, standard contract to

be used in all dealings rather than negotiating each contract on an individual basis. In

this situation, it is the terms of the contract, rather than the circumstances in which

the contract is made, which are under consideration.

Standard form contracts can have advantages to both supplier and purchaser provided

that a fair balance is achieved between both parties to the contract. They reduce

transaction costs for the supplier which would otherwise be passed on to the

purchaser. They allow for lengthy and detailed contracts to be finalised with the

minimum of time and by lay persons who only need to negotiate the specifics such as

price, description of goods and services and delivery times. Over a period of time,

people become familiar with the contracts because they are standard and may

encourage a general understanding of trading practice.

However, standard form contracts do pose problems. These types of contract will

usually have been drafted by professionals on behalf of the supplier. Generally, the

purchaser has no time or opportunity to read the contract before signing, let alone

obtain the same standard of advice as the supplier. If there is time to read it, it is

(Australia)

17

doubtful whether the purchaser will understand the meaning and impact of each term

in the light of the whole contract. Even if the putative purchaser did read and

understand the contract, the supplier may not be prepared to change clauses at their

request. This ‘take it or leave it’ attitude places purchasers in a difficult position:

agree to the terms or forgo the product or service. Although, at law, there may not be

a circumstance of duress, for example, or unconscionable conduct on the part of the

supplier prior to or at the time that the contract is made, the purchaser may have no

option but to agree if he or she wants the product.

It has become increasingly clear that many such standard form contracts contain

clauses which are unfair or unnecessarily one-sided to the detriment of the purchaser.

One reason that these have become so prevalent is that there is little, if any,

competition in this regard. Purchasers do not usually “shop around” on the basis of

the best contract terms: it would be too impractical an exercise for the vast majority of

people to decide, for example, which hire-car company to use based on the best

contract terms. Purchasers predominantly focus on price and the quality or

characteristics of the product. They may not appreciate that a “good” price has been

achieved through the imposition of onerous terms. As a result, terms may well be

standard across an industry and even if the purchaser went elsewhere, they would be

faced with a similar situation.

In 1976, Professor John Peden was asked by the then NSW Minister for Consumer

Affairs and Attorney General to prepare a report (the Peden Report) on a possible

legislative response to harsh and unconscionable contracts. He found that:

• the form of many contracts had become standardised so that there was often

little actual freedom of choice or negotiation of terms;

• the courts generally had no power to review the fairness of such standard form

contracts nor treat them any differently from contracts resulting from free

bargaining between parties of equal power and knowledge;

• the gap between the knowledge of a supplier and a customer in terms of the

product had become wider with a correspondingly greater opportunity for

abuse;

• the courts had felt the need to develop a number of devices to do justice in

individual cases. However, the result was not a frontal attack on the problem

of unjust contracts but a multitude of individual decisions; and

• the ability to grant relief in respect of harsh contracts conferred by other NSW

legislation had been confined to specific areas and had generally proved to be

When the European Commission commenced analyses of standard term contracts in

and Co-operative Societies and the Attorney General for New South Wales pp 4, 5, 6, 19, 20

18

On the adoption of the Unfair Terms in Consumer Contracts Directive in 1993 (see

below), the European Commission set up the European Database on Case Law about

Unfair Contract Terms (referred to as the CLAB database) to monitor its enforcement.

It includes court judgments, decisions of administrative bodies, voluntary agreements,

out of court settlements and arbitration awards. As at 2000, it contained 7,649 cases.

from CLAB to that point in time.

The Law Commission for England and Wales and the Scottish Law Commission in

from the United Kingdom Office of Fair Trading (UK OFT) indicate that

conservatively around 27,000 complaints are received annually in relation to unfair

There is no systematic collection of data on the incidence of the use of unfair terms in

Australia at the present time. However, in 2002, the Australian Consumers’

Association (the ACA) commented on the issue of unfair contract terms in its

adverse effect on competition. It noted that the use of unfair terms is increasingly

widespread and crosses all types of industry – mobile phones, vehicle hire, home

improvements, software sales, package holidays, air travel, and financial services to

name a few. Attachment 2 to its submission sets out a number of examples of unfair

terms used in contemporary standard contracts from mainstream lenders, the

telecommunications industry and in e-commerce. It also sets out a ‘black’ list of

consumer unfriendly terms in relation to telecommunications contracts and a ‘white’

The ACA submission also drew attention to the fact that a term may, in reality, be

unenforceable if a purchaser chose to challenge it in court. However, because it is

written in the contract, he or she may well not realise that this is a possibility.

Therefore, terms go unchallenged. In addition, small business is as significantly

affected by unfair terms as the individual consumer.

The ACA concluded that:

166); The Scottish Law Commission (Discussion Paper 119)

http://tpareview.treasury.gov.au/submissions.asp

19

In addition:

Some specific examples in the Australian context are:

• Mobile Phones

The Australian Bureau of Statistics reports that 61% of Australian households had at

least one mobile phone in the year 2000. Fair trading agencies, the ACCC and the

Telecommunications Industry Ombudsman receive complaints as to unfair and

inflexible contractual arrangements.

Research findings from ACNeilson, Legal Aid and the Consumer Law Centre in

Victoria revealed that contracts typically included provisions allowing

telecommunication companies to change services or charges without notice, including

those services or charges which were the major initial selling point. It was reported

that penalties were often arbitrary, difficult to understand and subject to change for

calls over a certain time, which exceeded the preset ‘free’ call level or for call

diversions. Contracts were usually in small print and there was pressure to sign them.

Approximately twenty five percent of the complaints to the Telecommunications

Ombudsman for the last two financial years related to mobile phone contracts.

However, it is not known the degree to which these related to unfair terms.

It should be noted that in December 2002 the Australian Communications Industry

Forum (ACIF) published a Guideline on Consumer Contracts which aimed to address

complaints of unfair terms. This is discussed in more detail later.

• Car Rental Industry

The SCOCA Car Rental Industry Working Party has examined a sample of consumer

complaints as well as contracts used by rental operators in a number of jurisdictions in

Australia. Its preliminary findings show that consumer complaints relating to car

rentals commonly involve:

- disputed vehicle damage and liabilities;

- complex and poorly laid out contracts with key provisions often being

obscured in small print eg insurance coverage and circumstances of full

liability;

- absence of transparent processes for vehicle inspection and damage

assessment; and

- contracts containing unreasonably harsh provisions.

purchased (model, features, etc.).

20

• Unilateral change clauses

Consumer Affairs Victoria (CAV) prepared a paper for a meeting of the Uniform

Consumer Credit Code Management Committee (UCCCMC) in Brisbane in October

2002 in relation to unilateral change clauses. It reported that CAV had received a

conditions”. The paper notes:

Finally, the development of technology means that the focus may now have to be

transferred to ‘non-negotiated’ rather than ‘standard’ clauses. The advent of

computers allows for contracts to be printed off as and when needed. This may allow

for some variation of agreements and therefore allow for the argument that a

particular contract is not ‘standard form’, that is, one that has been pre-printed and

there is no variation at all. The questions which then need to be addressed are:

- to what degree was any clause negotiated or able to be negotiated on an equal

footing by both parties; or

- was a real opportunity afforded to the purchaser to read and understand the

contract and its consequences?

21

The issue of unfair contract terms is not an exclusively Australian phenomenon. A

cursory look finds that Israel enacted the Standard Contracts Law in 1964; Sweden,

introduced a law identifying 20 types of unfair term in 1983; Portugal developed law

Council of Europe in 1976); and Thailand, the Unfair Contract Terms Act in 1997.

There is some ability for individual relief in relation to unfair contracts by way of

‘unconscionable conduct’ both at common law and the broader protection afforded by

the Commonwealth Trade Practices Act 1974 (TPA) as mirrored in State and

Territory fair trading legislation.

It should be noted that there are two contrasting aspects to unconscionable conduct as

it relates to contracts:

• firstly, procedural unfairness which is concerned with the circumstances

leading up to and at the time of the making of the contract; and

• secondly, substantive unfairness which is concerned with the unfairness of the

terms of the contract themselves which lead to an injustice.

Case law indicates that three factors need to be present for equity to intervene in a

contractual situation on the basis of unconscionable conduct:

• one party was at a serious disadvantage in relation to the second party and

the second party knew, or should have known in the circumstances, that this

was so;

• the second party has exploited or taken advantage of this situation; and

• the resulting contract is unconscionable or oppressive (for example:

Circumstances indicating a “serious disadvantage” would include drunkenness, age

and infirmity, lack of education, illiteracy or poor English, intellectual disability, low

income, emotional vulnerability and psychological problems. The fundamental

22

Where they find that there has been unconscionable dealing, the courts are able to

Thus, the common law is concerned with procedural injustice.

Section 51AB TPA, together with its mirror provisions in State and Territory fair

trading legislation, prohibits conduct which is, in all the circumstances,

unconscionable, in relation to certain defined situations. In deciding whether the

conduct in a particular case is unconscionable, the court may have regard to matters

such as:

• the relative bargaining strengths of the parties;

• whether undue influence or pressure was exerted or unfair tactics used;

• whether the consumer was able to understand the documentation;

• whether the consumer was required to comply with conditions which were

not reasonably necessary for the protection of legitimate interests of the

supplier; and

• the amount for which, and the circumstances under which, the consumer

could have acquired equivalent goods or services from another party.

As a result of this list, statutory unconscionable conduct is somewhat broader than the

common law, especially as it appears to include substantive injustice (see, for

example, the fourth and fifth points 4 and 5 above).

It has been stated:

Unfair Practices and Telecommunications Consumers (2001) Communications Law Centre Research

Report

23

However, in practice, the courts have been reluctant to base a decision on s 51AB

solely on substantive grounds. See, for example, the decision of the Full Court of the

This may well be a result of the inclusion of the words in all the circumstances in the

section and/or that, since there is no definition of ‘unconscionable’ in the TPA or its

equivalents, the courts will tend to look to the common law for some guidance.

Under the TPA and the State and Territory mirror provisions, the court can make any

order it sees fit including compensation (but not damages); an order avoiding or

refusing to enforce the contract in total or in part; an order varying the contract; an

order directing the return of monies or property; an order for the repair of, or parts for,

goods or for the supply of services. Applications for injunctions can be made

generally for the purpose of restraining a person from engaging in conduct in

contravention of the TPA by both consumers and fair trading agencies on behalf of

consumers. The ACA states that this remedy has not been used for the purpose of

As noted above, common law unconscionability does not address substantive issues.

Therefore the doctrine has no impact where terms are unfair in themselves but there is

no associated procedural unfairness.

In addition, there is currently a reluctance on the part of the courts, with respect to

statutory unconscionability, to find in favour of complainants with purely substantive

contract term issues. In practice, the impact of the statute law on the regulation of

unfair terms is probably no greater than for than common law unconscionability in

this respect.

Even if it were possible to take action in respect of substantive unconscionability

alone, unlike most other TPA provisions in relation to unfair trading practices (and the

State and Territory equivalents), unconscionable conduct is not a criminal offence.

Therefore, the enforcement mechanism is one of civil action, either by the fair trading

authority or the aggrieved party. Whilst civil action can result in an injunction and

orders for compensation which may be significant, changing behaviour in this way is

a slow process and can only relate to the particular parties involved. It does not

address the issue in any systemic way.

of the Trade Practices Act 1974 (the Dawson Inquiry)

24

until 2003 NSW was the only Australian jurisdiction to have legislation in relation to

Territory fair trading legislation. Indeed, whilst the TPA focuses on conduct and the

CRA ostensibly focuses on the contract (the former being therefore somewhat

broader in scope) there is significant similarity in the matters set out to be considered

by the court in deciding whether conduct is unconscionable or the contract is unjust,

although expressed differently. Under the CRA the court must take these matters into

account, but under the TPA the list is only advisory.

In general, the CRA provides that a court can grant relief in relation to a consumer

concurrently with the Uniform Consumer Credit Code.

“Unjust” is defined as includ[ing] unconscionable, harsh or oppressive.

Sub-section 9(1) of the CRA sets out the matters which the court must consider in

The court, where relevant, under sub-section 9(2) is also to have regard to procedural

issues such as material inequality of bargaining power; relative economic

circumstances; educational background; literacy of the parties; any unfair pressure;

whether or not legal or expert advice was sought; but also substantive issues such as:

protection of the legitimate interests of any party to the contract; and

unconscionable or against the public interest; the uniform Consumer Credit legislation, which allows a

transaction to be re-opened where the court considers it to be unjust; etc..

unconscionability was not inserted until 1998.

25

The CRA is not limited to “standard” terms although whether a term was negotiated

or not is a consideration for the court. Sub-sections 9(2)(d) and (g) in particular lean

towards the substantive. A person’s rights under the Act cannot be excluded or

restricted in any way.

Where the court finds a contract or a provision of a contract to have been unjust, it

may, if it considers it just to do so, and for the purpose of avoiding as far as practical

an unjust consequence or result: refuse to enforce any or all of the provisions of the

contract; declare the contract void, in whole or in part; vary any provision of the

contract, in whole or in part (effective from the time of the making of the contract

unless otherwise specified); or require execution of an instrument that varies or

terminates a land instrument (section 7).

When making an order under section 7 it may also make orders, inter alia, for the

disposition of property; the payment of money (whether or not by way of

compensation) to a party to the contract; the compensation of a person who is not a

party to the contract and whose interest might otherwise be prejudiced by a decision

or order under the CRA; and the supply or repair of goods or the supply of services.

As well as providing a mechanism for relief by an individual consumer on a case by

case basis, systemic relief is possible under section 10:

The CRA provides the Supreme Court and the District Court with jurisdiction to

consider contracts under the CRA (and the Local Court and the Consumer, Trader and

Tenancy Tribunal in more limited circumstances). The District Court's jurisdiction

depends on its monetary jurisdictional limit. In general, the provisions of the CRA

may be used either in actions commenced specifically or by way of defence in other

proceedings arising out of, or in relation to, the contract.

Only 6 years into the life of the CRA, the judiciary was describing it as:

Overall, however, procedural concerns seem to have continued to play a significant

26

160 cases were identified and a sample of 60 reviewed. Forty four cases involved

mortgage contracts, of which 18 were successful. Only one of these was held to be

In relation to cases since 2000, the NSW Office of Fair Trading undertook a

preliminary examination of 20 cases chosen at random which were decided with

reference to the CRA. Of these, 12 related to mortgages, and the rest to various other

types of contracts. Again, procedural considerations figured prominently.

The CRA relies on litigation as a mechanism for enforcing consumer rights.

According to the Australian Securities and Investments Commission, the limitations

of litigation as a mechanism for enforcing consumer rights are that:

• whether by private individuals or regulatory bodies representing consumers,

litigation is costly and time-consuming. There will only ever be a trickle of

cases;

• individual consumers will rarely be prepared, or resourced, to undertake

litigation and they will never do so in relation to smaller value transactions;

• individual cases only bind the parties to the case, the decision does not directly

impact on other traders using the same or similar terms;

• unconscionable conduct cases turn on their particular circumstances which are

readily distinguished for one another, thus limiting their precedential value;

and

• where precedents do build up, some businesses may begin to take heed of

them, but many others will either not be aware of the precedent or will proceed

With respect to the ability to deal with unfair terms in a systemic manner, Peden noted

contracts of a specified class in section 10 was not clear. He considered then that the

section was limited in that it can only affect future dealings, does not adjust existing

contractual rights and that separate proceedings would have to be brought in respect

of each contract.

where there is a large number of persons contracting, or there is significant diversity

23 p 133

22 Australian Securities and Investments Commission (2002), Submission to the Department of

Research Report, Sydney

27

In 1993 the States and Territories made the Uniform Credit Laws Agreement. The

Queensland Parliament passed the template legislation in 1994. Other jurisdictions

followed and the uniform system came into effect on 1 November 1996. It therefore

applies across Australia.

The UCCC in general applies to the provision of credit to a natural person or strata

corporation by a credit provider who provides credit in the course of, or incidental to,

a business where a charge is made for providing the credit so long as the credit is

predominantly for personal, domestic or household purposes (sub-section 6(1)). This

applies to real property as well as goods and services and therefore housing loans may

be covered. However, investment by a debtor is not for personal, domestic or

household purposes (sub-section 6(4)). The UCCC also applies to consumer leases,

related insurance contracts and related sales contracts (as defined).

same as that in the CRA, that is, it includes unconscionable, harsh or oppressive.

Section 70 of UCCC is concerned with procedural and substantive injustice. The list

of matters which may be taken into account by the court under sub-section 70(2) are

very similar to those which the court must take into account under sub-section 9(2)

CRA. Whether or not a term was the subject of negotiation is a matter the court can

consider.

justly due to the party under the contract… (section 71). There is no ability to deal

with unjust contracts in a systemic way. Action is only available to the individual

debtor.

Under section 72, the court may review unconscionable interest, fees or charges.

17 Mon LR at 274

28

Enquiries to date have not revealed any significant use of section 70. It would seem

that disputes are settled before they reach the courts and have not therefore been

subject to judicial scrutiny. Consequently, it is difficult to comment on the impact of

UCCC in this regard.

It is interesting to note that a significant proportion of cases brought under the CRA in

NSW are mortgage related even since the introduction of the UCCC.

In May this year, Victoria amended its Fair Trading Act 1999 to include provisions to

Unfair Terms in Consumer Contracts Regulations (these are discussed in detail

below) but there are some key differences.

In brief:

• if a consumer believes a term to be unfair, he or she can take the issue to

court; a term found to be unfair is void: the rest of the contract continues to

bind the parties if it is capable of existing without the term;

• in assessing whether a term is unfair, the court can have regard to whether the

term was individually negotiated; whether it is a prescribed term; and whether

it has an object or effect set out in the Act;

• standard form contract terms can be prescribed as unfair by regulation and it is

an offence to use or recommend the use of a prescribed term;

• the Director can apply for an injunction where it is believed that a person is

using or recommending the use of an unfair term in a consumer contract or a

prescribed term;

• an oral contract is covered with respect to consumer contracts;

• a term relating to price is covered by the provisions;

• a contract to which the UCCC applies is not covered; and

• business to business contracts are not covered.

containing the provisions in October 2002 but it lapsed due to a State election being called.

29

Whilst the individual consumer can take their contract to court, CAV can deal with

matters systemically in relation to standard form contracts. Unlike the United

Kingdom, Victoria has the ability to develop a ‘black’ list of terms through

regulations which prescribe unfair terms and is also able to prosecute if these are

used.

Under s163, a general provision in the Victorian Fair Trading Act 1999, a written

contract must be easily legible, in a minimum of 10 point if printed and must be

clearly expressed. The Director can apply to the Victorian Civil and Administrative

Tribunal if it is believed that a term does not comply with this section. The Tribunal

can prohibit the supplier using the provision and there is a penalty for failure to

comply with the order.

which has elapsed, it has not been possible to assess the impact of the provisions for

the purposes of the Paper.

The Australian Communications Industry Forum (ACIF) is the industry organisation

which develops Industry Codes for the telecommunications industry. It has this role

In December 2002, ACIF published an Industry Guideline on Consumer Contracts

from additional and specific guidance on issues of contractual fairness, particularly as

consumer supply contracts in the telecommunications industry are commonly

prepared in advance by the supplier and there is little or no scope for these to be

individually varied.

A working committee was set up to provide guidance on industry best practice for

contract provisions and guidance on unfair and unintelligible contract terms generally

and in specific contexts. It stated that its work was significantly influenced by the

Guideline notes:

website - http://www.acif.org.au

30

The Guideline relates to contracts between consumers and suppliers, with consumer

of the United Kingdom legislation. A term is unfair if it causes a significant and

unreasonable imbalance in the parties’ rights and obligations arising under the

Contract to the detriment of the Consumer. Examples are provided of terms which

might be unfair.

written. It also has a section on providing information to people with speech and

communication difficulties and from non-English speaking backgrounds.

ACIF appears to have taken the issue of unfair contract terms seriously. However, it

should be noted that all major consumer groups withdrew from the ACIF working

party in late 2001. The Australian Consumers Association and the Consumer Law

Centre Victoria, in a joint submission on the draft Guideline, were critical of the fact

that the document is only a guideline and therefore is not binding on members of the

industry. It remains to be seen the degree to which it is capable of effecting a change

in behaviour by the suppliers of telecommunications services.

The Australian Communications Authority (the Authority) undertook a preliminary

review of the effectiveness of the Guideline in early 2003. At that stage, the Authority

considered that there had been little impact on the industry but acknowledged that the

period since introduction had been short. It is undertaking a further review which will

Statutory intervention in the United Kingdom (the UK) has also focussed on the

substantive rather than the procedural. There is no equivalent in UK consumer

protection/fair trading legislation to the unconscionability provisions in Australian

statutes discussed above.

http://www.aca.gov.au/aca_home/publications/reports/CLC_Report.pdf. The Authority has requested

ACIF to develop an Industry Code. A draft is to be available for public comment by 26 February 2004

and the Code is to be submitted for registration by 26 May 2004.

31

by legislation as far back as 1854, but with a focus on exclusion and limitation of

liability clauses. By virtue of the Supply of Goods (Implied Terms) Act 1973

(SOGITA), all sellers were prevented from excluding or restricting liability:

• generally with respect to the implied obligation as to title;

• in relation to consumers with respect to the implied obligations of

merchantability, fitness for purpose, correspondence with sample; and

• for non-consumer sales with respect to the implied obligations of

merchantability, fitness for purpose, correspondence with sample, only to the

degree that it could be shown to be fair and reasonable.

The Unfair Contract Terms Act 1977 (UCTA) in general incorporates the SOGITA

provisions. Whilst it applies to both consumer and business to business contracts (as

well as to terms and notices excluding certain liabilities for negligence), irrespective

of whether the terms are negotiated or standard, it only covers exclusion and

limitation of liability clauses (and indemnity clauses in consumer contracts). It makes

certain exclusions or restrictions of no effect at all and subjects others to a test of

to the aggrieved individual to bring legal action and so there is no opportunity to deal

with unfair terms systemically. The consequence of a term being found to be unfair is

that the contract is viewed as if the term never existed. There is nothing under UCTA

to prevent a party, aware that a term is probably unfair, from including it in a contract

UK Regulations) (replacing those of 1994) are an enactment into UK law of the EU

Londonderrry, Northern Ireland – Annexe to Minutes for Proceedings of the Conference “The Unfair

Terms Directive: 5 years on” – 1-3 July 1999

UTCC Regulations through a joint process by the Law Commission and the Scottish Law Commission.

The latter has provisionally recommended a model which would combine the UTCC Regulations and

the UCTA.

32

addition to UCTA.

The EU Directive and therefore the UK Regulations cover:

• contracts involving consumers – any natural person who is acting for purposes

other than his (sic) trade, business or profession; and

• contractual terms which have not been individually negotiated, particularly

pre-formulated standard contracts;

• oral and written contracts;

and provide that:

• written contracts must be in plain intelligible language; and

• unfair terms are not binding on the consumer.

brought under the UK Regulations the Court of Appeal stated that the

• a consumer is not bound by a term which is unfair. The rest of the contract is

binding if it is capable of continuing in existence without the unfair term;

• if a term is individually negotiated, it is not covered by the UK Regulations,

but any non-negotiated terms within the same contract are covered;

• if a consumer believes a term to be unfair, he or she can take the issue to court

or can use it as defence in court proceedings against them;

• where a term has been drawn up for general use, the United Kingdom Office

of Fair Trading (UK OFT) (or the main sectoral regulators and the 200 local

authority trading standards services) can seek an undertaking or apply for an

injunction to stop businesses using unfair terms.

The UK Regulations do not cover:

• price setting – provided it is in plain, intelligible language;

• terms defining the product – provided they are in plain, intelligible

language;

• terms required by law or explicitly allowed by law;

• specially negotiated terms;

• business to business agreements;

• sales by private individuals; or

• terms in non-consumer contracts such as employment agreements.

33

Examples of unfair terms are contained in a so-called ‘grey’ list in Schedule 2 of the

UK Regulations. The list is not exhaustive and a term is not unfair simply because it

is on the list. The UK OFT has issued detailed guidance on how and why some terms

could be considered unfair.

This view that procedural fairness is not a necessary requirement was supported by

not contradict this position even though the decision in relation to the fairness of the

It should be noted that whilst the EU Directive sets out the provisions as to when and

take their contract to court but also for UK OFT to deal with matters systemically in

the general interests of consumers and competitors. Indeed, the UK OFT is mandated

to deal with any complaint in relation to a contract term drawn up for general use and

complaint valid, it can apply for an injunction preventing the trader from using the

term or obtain an undertaking from the trader as to future use of the term. A court can

grant an injunction on any terms it deems fit, not only in relation to the particular

trader but to an industry sector.

matter to court. Compare this with the Irish Regulations which contain no such restriction and the Irish

34

An example of success is in the area of mobile phone contracts where negotiations

with one phone company led to the removal of a number of offending provisions and

others in the market quickly followed. In October 2002, the UK OFT reported another

significant success with the travel industry with the Association of British Travel

Agents agreeing to revise its model contract. This will deal with problem areas such

as surcharging, cancellation rights and compensation. The UK OFT has rarely had to

resort to court action, proceeding by way of education, advice/guidance, negotiation,

undertaking and threat of court action. The UK OFT identified the widespread use of

unfair disclaimers in places such as car parks, especially where a ticket makes

reference to rules and conditions not listed on the ticket and of which consumers are

often unaware. It contacted over 500 organisations, including local authorities in

The UK OFT manages a significant number of complaints. Before the 1994

Regulations, a small number were dealt with in the Small Claims Court. Between July

1995 and December 1998, UK OFT received over 3,000 complaints, of which 75%

resulted in some form of action and in 1200 of the matters, the business concerned

amended its contract terms in some manner. Complaints related to contracts for a

wide variety of goods and services, including double glazing, public broadcasting,

educational services, telecommunications, motoring services, credit card services,

insurance, holiday and tour operations, football clubs, beauty parlours, car sales, gas

For the period January 2002 to March 2003, the Annual Report shows that the UK

OFT received 1,310 complaints and 1,649 terms were abandoned or amended as a

result of enforcement action. Five formal undertakings were given and 137 informal.

Most common of the successfully challenged terms were on the issues of:

- exclusion or limitation of liability for breach of contract, especially liability for

defective or misdescribed goods, poor services/work/materials and restrictions

on the amount or type of liability;

- plain and intelligible language;

- financial penalties;

- unfair financial burdens; and

- disclaiming liability for employee’s statements.

The UK OFT publishes the Unfair Contract Terms Bulletin (the Bulletin) on a

quarterly basis which contains reports of cases where standard contract terms have

been amended or deleted as a result of enforcement action under the UK Regulations.

Appendix B contains a breakdown of statistics from the Bulletin for the quarter

October to December 2002 by way of example of the work of the UK OFT. During

that period, 37 cases were completed by the UK OFT. Four hundred and eighty-four

contract terms were abandoned or amended as a result of enforcement action under

Regulation 10, in all but 1 case by undertaking. There are also 4 cases completed by

other bodies, in which a further 17 terms were revised.

35

The results where an aggrieved consumer pursues the matter to court themselves are

probably less spectacular. The consequence for use of an unfair term in the UK is

only that the term in question is not binding on the consumer. The remainder of the

contract remains binding on both parties as far as this is possible without the

offending provision. Other EU member states have taken a stronger stance; for

example, in Luxembourg, the court may declare the terms of a consumer contract null

and void and if a trader uses a term which has been so declared in relation to them,

they can be subject to a fine. Portuguese and Spanish law prevent the use of certain

terms, and if they are used, the whole contract can be declared void.

Similarly, whilst there is a requirement that a written contract be in plain and

intelligible language, the term is not regarded as unfair if this is not so. In this

situation, the term will be given the meaning most favourable to the consumer. Such

an interpretation could still leave the consumer in an unfavourable position.

New Zealand does not have one specific piece of legislation which protects against

unfair terms in consumer contracts. The two main pieces of consumer legislation in

The NZ FTA covers misleading and deceptive conduct in trade, trade descriptions,

unfair practices, consumer information and product safety. Liability is strict (as the

breach may be innocent). The type and amount of any awarded civil remedy is

discretionary. Unlike the TPA, on which it is largely based, it does not have

unconscionable conduct provisions.

The CGA applies to the supply of goods or services which are intended for ordinary

household use. The Act provides consumers with a number of implied guarantees. It

imposes obligations on sellers and manufacturers and provides a number of remedies

that enable the consumer to pursue the manufacturer or seller of the goods or services.

Contracting out of either the NZ FTA or the CGA is prohibited in most

circumstances. There is no legislative equivalent in New Zealand to the UK

Regulations or UCTA.

There are a number of New Zealand statutes that reform the common law approach to

contractual relationships.

The Contractual Remedies Act 1979 allows a party to a contract to recover damages

(assessed as if the representation was a term of the contract) for an innocent or

negligent misrepresentation which induced the contract and also governs the

circumstances in which a party is entitled to cancel a contract. Cancellation of a

contract results in all parties being relieved from further performance but the Act also

provides the courts with broad discretionary powers to grant remedial relief to any

party to prevent injustice when a contract is cancelled.

The Contractual Mistakes Act 1977 and the Illegal Contracts Act 1970 largely codify

36

the established common law rules relating to contracts which are entered into by

mistake or contrary to law. Both statutes, however, confer on the court a broad

statutory discretion to grant remedial relief in respect of contracts subject to those

It is understood that the issue of unfair contract terms is potentially one area that the

Ministry of Consumer Affairs in New Zealand will be investigating in its proposed

review of consumer protection law and its enforcement.

The United States have statutory unconscionability which covers 51 of 52 States

through adoption of the Uniform Commercial Code, specifically s2-302 (which

influenced Peden’s proposals in relation to the CRA). It would seem that, similarly to

Australia, substantive unconscionability alone is not sufficient, although the US courts

said:

positions and hidden terms common in the context of adhesion [standard form]

It is understood that American jurisdictions do not have legislation comparable to that

of the European Union/United Kingdom, although concern has been expressed about

the inclusion of clauses in standard form contracts which disable purchasers’ rights to

pursue legal action in support of their rights by requiring them to go to private

arbitration for any dispute rather than pursuing other remedies. The concern is that

private arbitration while ostensibly independent may well be fundamentally

disadvantageous for the consumer or purchaser. The PayPal case above was

concerned with a clause in a contract requiring that consumer complaints be

individually arbitrated in accordance with the rules of the American Arbitration

Association and in California. The court found the clause to be unconscionable due to

lack of mutuality and the practical effect of the clause with respect to costs, venue and

consolidation of claims.

In 2002, the North Carolina State legislature was considering a bill for its proposed

United States district court for the Northern District of California

USA.

37

of legal or procedural rights revocable and not binding on the party to the contract.

Further, it would be unconscionable for standard form contracts to include provisions

which would have the effect of disabling a person’s procedural rights in the

enforcement of their legal rights.

As far as it has been possible to ascertain, Canadian jurisdictions also do not have

EU/UK type provisions.

There are examples of consumer protection/fair trading legislation which are relevant

In Canadian jurisdictions unconscionable conduct is an offence.

representation” to be an unfair practice. Unconscionability would include the

procedural matters such as physical infirmity, ignorance, illiteracy, and inability to

understand the language of an agreement, but also:

the consumer; and

refers to:

difference in price and the reason for the difference; and

practice is unconscionable, requires a court to consider all the surrounding

circumstances of which the supplier knew or ought to have known, including

procedural matters and

obtainable by similar consumers; and

38

British Columbia is proposing a new Consumer Protection Act which will combine a

It is not known whether the apparently substantive provisions in the examples above

are successful in their own right. However, similarly to Australia, it would seem that

Canadian common law jurisdictions have not differentiated between substantive and

procedural matters.

The same applies to a clause without effect or deemed unwritten.

Not only ‘western’ nations have enacted legislation with respect to unfair contract

translation is not the most fluent, it would seem that the intention of the legislation is

to address the substantive issue of unfair terms, although the inclusion of the criteria

Ministry of Public Safety and Solicitor General, British Columbia, Canada

OBLIGATIONS IN GENERAL CHAPTER II CONTRACTS

39

The review of the incidence of unfair contract terms and their management to date

outlined in Part A indicates that:

a. the issue of unfair terms in contracts is a phenomenon experienced in many

countries and there is evidence to indicate that Australia is no exception (see

UK OFT Bulletin; data from UK OFT Annual Report; CLAB database;

ACA’s submission to the Dawson Inquiry; also, the number of countries

which have put some control in place);

b. unfair terms are commonly found in a diverse range of industry types across

the marketplace (see UK OFT Bulletin; data from the UK OFT Annual

Report; CLAB database; ACA’s submission to the Dawson Inquiry);

c. to date, Australian law has responded to unfair contracts which have an

element of procedural unfairness; that is, where the circumstances leading up

to, and/or at the time of the making of the contract, create unfairness (see:

common law; TPA and equivalents; CRA; UCCC);

d. under the current legal regimes in Australia, the courts have been reluctant to

find unfairness solely on substantive grounds, that is, on the basis that the

unfairness of the actual terms of the contract leads to an injustice (see case law

in relation to TPA and CRA);

e. legal regimes to date in Australia have not proven effective in managing unfair

contract terms systemically and therefore the impact on the marketplace has

been minimal (only the CRA attempts to provide for systemic intervention

with no real outcomes to date); and

f. the current statutory regimes in Australia have created some confusion in

practice because of their failure to distinguish between procedural and

substantive unfairness (per Goldring et al and Duggan).

Question 1:

(a) Do you have any comments in relation to these conclusions?

(b) Do you, or does your organisation, agency or business, have any data or other

information which would indicate the level of concern in relation to unfair

contract terms?

40

This Part considers 5 options in relation to unfair contract terms:

• no additional regulation;

• self regulation;

• UK model and variants;

• Contracts Review Act 1980 (NSW); and

• a composite model.

There is also discussion whether, or to what extent, unfair terms regulation could or

should include business to business transactions.

To reach a conclusion that no further regulation is required in relation to unfair

contract terms, there would need to be agreement that:

• there is no identified problem; or

• any identified problem is not causing sufficient detriment in the market place

to justify intervention; or

• there is an identified problem but it is being effectively managed through

current mechanisms.

Not imposing any additional regulation would mean keeping the status quo of reliance

on section 51AB Trade Practices Act 1974 (unconscionable conduct) (and its mirror

provisions) and section 70 Uniform Consumer Credit Code. In New South Wales,

subject to its review, the CRA would continue to apply and in Victoria the new

provisions in relation to unfair contract terms in its Fair Trading Act 1999 will be

taking effect.

A decision not to regulate further in this regard would not affect the ability of

consumers to take action in relation to procedural issues which come within the ambit

of the TPA and the corresponding provisions in State and Territory fair trading

regimes, and the UCCC.

With respect to substantive unfairness and systemic problems associated with unfair

contract terms, there is less effective management (although this may soon be

addressed in Victoria as a result of its new legislative provisions). Whilst there is

currently no systematic collection of statistics on unfair contract term complaints

around Australia, the information gathered in Part A would indicate that the issue of

unfair terms in contracts is a matter of concern. The indications are that the use of

unfair terms, particularly in standard contracts used on a daily basis, is across all

industries. In these situations, the consumer may find themselves subject to extra

charges or effectively bearing most, if not all, of any risk. Rights are given to the

supplier without either corresponding rights being given to the consumer or

41

appropriate boundaries being placed on the exercise of the supplier’s rights.

Consumers also find themselves in the position that they may not have fair and

reasonable access to goods and services in the marketplace because, unless they are

prepared to agree to the terms which are significantly to their disadvantage, the

supplier will not provide them.

A decision not to regulate for substantive unfair contract issues would leave this

inequity unaddressed. This may lead to a lack of confidence in the marketplace.

There would be no costs or disadvantages to business in not introducing further

regulation for unfair terms in a business-consumer context, except that there would be

inconsistencies between the States and Territories legislative response, aside from the

TPA mirror provisions and UCCC, which may create uncertainty for business.

Since no greater government intervention would be involved if no further regulation

was introduced, there would be no extra compliance or enforcement costs. However,

agencies would continue to receive complaints as to the unfairness of contract terms

and not be able to address these in any systemic way. Their ability to influence

behaviour in the market in this regard would be limited.

There may be costs to consumers if there is no further regulation. The only way for

them to obtain relief is to undertake potentially expensive litigation. Their chances of

success in a case based solely on substantive grounds currently seems small and

therefore consumers are likely to be dissuaded from taking action where there are no

procedural issues. Case by case reform is also a slow and cumbersome way of

changing behaviour across a broad spectrum of the marketplace.

The use of unfair terms may also have financial implications for consumers if they

believe, for example, that their rights to legal redress have been taken away under the

contract.

Question 2:

Does Australian law, in general, adequately cover the issue of procedural unfairness

in contracts? Why/why not?

Question 3:

Is there a need to regulate contract terms which are unfair in themselves? Why/why

not?

Question 4:

What do you consider the costs/benefits : advantages/disadvantages to be in not

regulating further?

Self regulation through, for example, voluntary codes of conduct is a potential

mechanism for managing unfair contract terms. The ACIF Guideline is an example of

self-regulation of the issue (see 2.1.5 above).

42

A voluntary code has the advantage that market participants have the responsibility of

developing and administering the code, rather than government. As a result,

government does not incur costs in regulation and the costs to business in complying

may be less. Since any cost to business may be passed on to the consumer, this would

also have less impact on the latter. There may, however, be a cost to business in the

development and enforcement of any code.

For self regulation to be effective, it requires that there be sufficient commitment from

business, either individually or through industry associations. It is submitted that since

the incidence of unfair terms is so widespread and across such diverse industries, it is

unlikely that this would be the case. In any event, attempting to develop codes across

the marketplace would be very time consuming and it may well take years before any

results are seen.

Voluntary codes can be difficult to enforce. Often, the ultimate sanction is to expel the

trader from the industry association. This means that there may be no mechanism to

ensure that their conduct is fair if the behaviour is not caught by the general fair

trading laws around the country.

It may also be difficult to market the concept that a particular business is better to deal

with because its contract terms are fairer as consumers have not tended to focus on

comparing the contract terms on offer. However, industries with existing codes could

extend them to cover unfair contract terms or include unfair terms in a broader

industry code.

The ACIF Guideline does not go as far as a voluntary code as there are no

consequences for non-compliance. It is yet to be seen whether it has an effect on the

considered that a binding code would not be appropriate as individual suppliers have

their own contracts tailored to fit their own commercial situations. It also suggested

that a binding code might be regarded as anti-competitive. It noted that the benefits in

adopting the ACIF Guideline would include reduction in consumer complaints and

dispute resolution; consumers having a better understanding of their rights and

obligations; and consumers therefore making more informed choices. The costs to

Question 5:

Are guidelines, voluntary codes of conduct or any other methods of self regulation by

industries an appropriate and effective way to regulate with respect to unfair contract

terms? Why/why not?

43

Question 6:

Are you aware of any other industry-based initiatives to manage unfair contract

terms? If yes, please provide details.

Question 7:

What do you perceive the costs/benefits : advantages/disadvantages to be in self

regulation in relation to unfair contract terms?

This model and its variants prohibit the use of unfair terms in consumer contracts and

provide a mechanism for determining whether a term is unfair. There is provision for

not only individuals to take action but also for fair trading agencies to deal with unfair

terms systemically. The Victorian variation also allows for a ‘black list’ of terms

which will be regarded as unfair and for prosecution for use of such terms. (See the

discussion at sections 2.1.4 and 2.2.2 above.)

The Schedule to the Paper sets out in detail, as variations of one model, the UK

Regulations, the Victorian provisions and the views of the SCOCA Unfair Contract

Terms Working Party (the Working Party) on the model. Comment is sought on all

three aspects.

Question 8:

Is it desirable to adapt the UK model to the Australian context? Why/why not?

If yes, please read the Schedule to the Paper and address the issues raised (questions 9

– 29).

An advantage of the UK/EU model is that, since it has been in existence for at least 8

years, it is possible to evaluate the costs and benefits which flow from it. It is arguable

that the model is not a purely “black letter law” response and could be regarded as coregulatory

in practice as it provides a mechanism for entering into dialogue with

business which is then proactively involved in trying to solve the identified problems.

In its submission to the review of the Western Australian Consumer Affairs Act 1971

44

The following are comments from UK OFT in response to a request for information

OFT UK

45

The statistics from OFT UK indicate that in a 12 month period, it would deal with

around 1000 complaints.

In addition, as noted above, certain other bodies, such as local authority trading

standards services are also able to deal with unfair terms. These bodies voluntarily

supply quarterly returns to UK OFT classified by goods, services and trading

practices. For the 12 months to 30 September 2001, 26,566 complaints were received

by these other bodies who submitted returns in relation to unfair terms including

46

Assuming that the incidence of unfair terms is comparable to that of the UK and

proportionate to the population, it could be guessed that the complaint level in

Australia, across the jurisdictions, might be around 9,000 complaints annually. There

would therefore be an impact on government in managing these complaints.

It is noted that under the Victorian provisions the Director is empowered to take

action, rather than mandated as under the UK provisions. This would allow for some

control over the workload from the point of view of the fair trading agencies, but, as

noted above, the impact on the market will depend on the level of activity. However,

it has been anticipated that the ability to prescribe unfair terms, which would then

carry a threat of prosecution if used, would act as a deterrent to business and require

less intervention. The UK legislation does not have a comparable ability.

There would be a cost to business if there was not national consistency in the way that

such a regulation is administered and enforced. There would be a cost to government

in providing the necessary mechanism to ensure national consistency.

Question 30:

(a) Is the cost to government in implementing regulation of unfair terms under this

model justified? Why/ why not? (b) Are there other costs/benefits :

advantages/disadvantages to government under this model?

Question 31:

Under such a model, should the relevant fair trading agencies be empowered or

mandated to investigate complaints in relation to unfair terms? Why/why not?

It is not considered that the cost to business would be burdensome. There may be

some cost in having current contracts reviewed in order to see whether they infringe

the concept of unfair terms. Where terms need to be changed, either at the instigation

of the supplier or due to action from a fair trading agency, there may be a cost in redrafting,

re-printing and loss of any current print copies. However, this would be a

“once and for all” cost.

An advantage to business may be increased consumer confidence which is always of

benefit to the market. The threat of court action would also be removed if contracts

were pro-actively amended which would eliminate possible costs and create greater

certainty for business. In line with ACIF’s comments previously, there may also be a

reduction in consumer complaints and therefore dispute resolution costs; consumers

should better understand their rights and obligations and therefore make more

informed choices.

Question 32:

(a) What are the costs to business under this model of regulation and are these costs

justified? Why/why not? (b) Are there other costs/benefits : advantages/disadvantages

to business under this model?

Depending on the cost to business, there could be a positive or negative financial flow

on to consumers. However, this should be minimal in light of the discussion above.

47

The advantage to consumers is that they should be better protected from finding

themselves in detrimental contractual circumstances.

The inclusion of a ‘black list’ in the Victorian variation and the ability for fair trading

agencies to act systemically would mean that changes to market behaviour could

potentially happen relatively quickly.

Question 33:

(a) Are the benefits to consumers under this model sufficient to justify its adoption?

Why/why not? (b) Are there other costs/benefits : advantages/disadvantages to

consumers under this model?

The CRA model provides a mechanism for individuals to take action with respect to

unjust contracts and for the State fair trading agency to take systemic action. (See

Section 2.1.2 above for a detailed description of the CRA and its operation.)

The CRA may impose uncertainty on businesses that have contracts for the supply of

goods and services with consumers. As a result, there may be costs involved in

businesses identifying and using terms which are comparatively 'safe' from potential

challenge under the CRA. Even though the potential to effect system change offered

by section 10 of the CRA has rarely been used, terms may nevertheless be challenged

on a case by case basis under the CRA.

There are costs to business in defending actions for relief under the CRA. Costs

incurred by businesses as a result of the CRA, including the costs of any relief ordered

by the court, may be passed onto consumers in the form of higher prices.

Government has to allocate the appropriate resources in the court and legal systems to

enable consumers to bring actions, although the direct cost of the action in general is

borne by the individual consumer.

The CRA delivers benefits to consumers in that it offers the potential to avoid unjust

terms and it may influence business practice when courts hand down decisions on

what would constitute an unjust contract. It may therefore prevent the exploitation of

vulnerable consumers by deterring businesses from using certain contractual terms.

To the extent that the CRA has led to an increase in the fairness of consumer contracts

being offered by businesses, the CRA may have increased consumer confidence and

business profitability in particular industries, although this may be difficult to

quantify.

The NSW Office of Fair Trading is currently undertaking a review of the Act. As

discussed previously, the indicators at present are that the courts have still tended to

require an element of procedural unfairness. The systemic possibilities of section 10

have also not produced significant outcomes to this point in time.

48

Since the CRA is compatible with the UCCC, it could be argued that it would be

appropriate to use the model as it would create consistency across the marketplace

with respect to individual court actions in relation to unfair contract terms.

Question 34:

(a) Is the CRA a suitable model for a nationally consistent regulatory regime for

unfair contract terms? Why/Why not? (b) Would the CRA model benefit from

amendment in any way?. Please give reasons and, if yes, detail amendments.

Question 35:

What do you consider the costs/benefits : advantages/disadvantages to be in the CRA

model?

A final option for regulation would be a model which incorporates aspects of all the

other models.

Whilst it has been argued that there is probably sufficient coverage of the procedural

aspect of unfair contract terms, the criticism noted earlier by Goldring et al, that

current Australian legislation is problematic in that it does not distinguish between

procedural and substantive issues, is considered to be valid. In order to create clarity,

the opportunity might be taken, whilst addressing the issue of unfair contract terms, to

rectify this situation.

In this model there would be two parts to any unfair contract legislative provisions.

The first part would deal with procedural issues alone and would refer to “unjust

contracts”. This would draw substantially on the provisions of the CRA/UCCC since

they refer specifically to unconscionable contract situations. The provisions would

use the definition common to both of these pieces of legislation. In relation to the

matters which the courts take into account in determining whether the contract is

unjust, it would take only those matters from section 9 CRA and section 70 UCCC

which are procedural in character. It is suggested that, as in the CRA, the court should

be mandated to consider these.

The aggrieved individual would take this matter up him or herself, or a fair trading

agency could seek an injunction, as is the case currently with the TPA/fair trading

equivalents. There would not be a systemic aspect to intervention as each case would

turn on its circumstances. There would therefore be no equivalent to section 10 CRA.

The second part of the provisions would deal with substantive issues and would be

with respect to “unfair terms”. It would consist substantially of the Victorian/Working

Party version of the UK model, without reference to anything which would imply a

procedural focus. As a result, there would be both individual consumer redress but a

systemic response to the general use of inappropriate terms.

It is suggested that UCCC be amended in line with the first part to ensure consistency

but that it be subject to the provisions as to unfair terms in the second part in general.

This would then ensure a uniform framework irrespective of whether there was a

49

credit focus or not. With respect to procedural issues, only NSW currently has this

level of uniformity.

It would then be necessary to consider the interrelation of these provisions with the

current unconscionable conduct provisions of the TPA and its equivalents. However,

it is worthy of note that when the NSW Fair Trading Act 1987 was enacted, it

included section 43 (the mirror provision to section 51AB TPA) although the CRA

was operative. Clearly, the conduct provisions would continue to apply to a wider set

of situations than the contract itself.

It is suggested that through this model, it would be quite clear that a contract could be

challenged on either procedural or substantive grounds, although both could be

applicable in particular cases.

There would be little impact on business, consumers or government in relation to the

procedural aspects, but there would be more clarity for all concerned.

There would be better court outcomes for aggrieved individuals due to the

differentiation between procedural and substantive matters.

The comments made previously in relation to the UK model and variants made above

would be relevant again here.

Question 36:

Is the composite model a suitable model for a nationally consistent regulatory regime

for unfair contract terms? Why/why not?

Question 37:

Are there costs/benefits : advantages/disadvantages in relation to the composite model

in addition to those raised in options 3 and 4?

Question 38:

(a) Which of the five options listed do you consider is the most appropriate way to

proceed? (b) Are there any other options you believe should be considered? Please

detail.

Question 39:

If the decision was for government regulation, should nationally consistent legislation

for unfair contract terms be uniform or harmonised? Please give reasons.

50

The focus of the Paper has been on contracts between business and consumers.

However, a number of other countries have provisions covering unfair terms in

contracts between business entities. Some Canadian Provinces and the Netherlands

include ‘small business’. Swedish, German and Dutch law, whilst aimed at

consumers, is translated into the B2B context by the courts. Interestingly, Sweden

reports that the powers have often not been needed because informal settlements have

been entered into. The US unconscionablility provisions in the Uniform Commercial

Code can be used in a B2B situation but the courts look to the relative bargaining

powers of the parties and only act where one side is in a position of weakness.

It was considered useful, whilst seeking the community’s views on the regulation of

business/consumer contracts, to also raise, and seek comment on, the possible

regulation of unfair contract terms in the B2B context. However, it is the view of

SCOCA, if it should be decided in due course to regulate with respect to B2B, that

implementation would not be considered for at least 12 months after any business to

consumer regulation might be put in place.

The provisions in the UK UTCCR, and the Victorian unfair terms provisions in its

Fair Trading Act 1999 apply only to consumer contracts which have not been

individually negotiated. The NSW CRA, whilst generally only applying to consumer

contracts, does specifically include farming enterprises. The provisions in the UK

UCTA, which mainly deal with terms seeking to exclude or limit liability, apply to

both B2B and business to consumer (B2C) contracts. The EU Directive does not

cover B2B but this is in line with the EU’s overall policy of focussing on consumers.

In many cases business, and in particular small business, face the same imbalances in

bargaining power which consumers face when contracting with suppliers of goods

and services. Often business will be confronted with standard form contracts on a

“take it or leave it” basis.

Trade Practices Act 1974 in Protecting Small Business

51

In particular, the ACCC expressed concern with respect to unilateral change clauses

which are not referable to an external trigger or further negotiation between the

parties.

Prohibiting the use of certain terms in consumer contracts, but not in B2B contracts,

may increase the disadvantage suffered by business. For example, prohibiting a term

in a consumer contract which would allow a retailer to increase the contract price for

the goods and services to be provided could cause difficulties for the retailer if his or

her supplier/manufacturer is allowed under the contract to unilaterally increase the

cost of goods or services to be supplied.

The Law Commissions’ Paper outlined a number of terms commonly included in

standard form B2B contracts which are often unfair to one party to the contract; These

include:

• deposits and forfeiture of money clauses;

• high default rates of interest (unless characterised as a penalty);

• clauses allowing unilateral variation in price;

• termination clauses where the circumstances in which one party to

terminate may terminate are much wider than those for the other party;

• unequal notice periods; and

• arbitration and jurisdictional clauses severely restricting the rights of a

party to choose a forum in which a dispute may be resolved.

preventive or systemic powers as for consumers under the UTCCR and if so, whether

they should be available to protect all business, regardless of size. It did draw

attention to the fact that including B2B coverage by UTCCR type provisions would

not be such a great change in the UK because of the control already exerted by

UCTA.

Common law unconscionability applies in the same way as described in business to

consumer transactions previously.

With respect to statutory unconscionability, B2B transactions are covered by sections

51AA and 51AC TPA.

Section 51AA provides that a corporation must not, in trade or commerce, engage in

conduct that is unconscionable within the meaning of the unwritten law of the

Australian States and Territories - that is, the general non-statutory or common law as

it has evolved through decisions of the courts. 'Unconscionability' is accordingly not

defined in the TPA. Section 51AA does not apply to situations covered by section

51AC.

52

Section 51AC specifically prohibits one business dealing unconscionably with

another in the supply or acquisition of goods or services. The provision does not apply

to conduct before 1 July 1998, to transactions greater than $3million, or to

transactions in which the business subject to the conduct (target business) is a listed

public company.

Although the Act does not define 'unconscionable conduct', section 51AC does

include a non-exhaustive list of factors which may be taken into account by the court.

Expressed briefly, these are:

• the relative bargaining strengths of the parties;

• whether, as a result of the stronger party's conduct, the other was required to

meet conditions not reasonably necessary to protect the stronger party's

legitimate interests;

• whether the target business could understand any documentation used;

• the use of any undue influence, pressure or unfair tactics by the stronger party;

• how much the target business would have had to pay/charge, and under what

circumstances, to buy/sell identical or equivalent goods or services from/to

another supplier;

• the terms and circumstances in which the weaker party could have engaged in

a similar transaction with another party;

• the extent to which the stronger party's conduct was consistent with its

conduct in similar transactions with other businesses;

• the requirements of any applicable industry code (or of any other code if the

target business acted in the reasonable belief that the stronger party would

comply with it);

• the extent to which the stronger party unreasonably failed to disclose:

o any intended conduct that might affect the interests of the target

business, or

o any risks to the target business arising from that conduct which the

stronger party should have foreseen would not be apparent to the target

business;

• the extent to which the stronger business was willing to negotiate with the

target business the terms of any supply contract; and

• the extent to which each party acted in good faith.

It is not understood that the case law has dealt with unconscionability any differently

with respect to B2B transactions, that is, the courts require some element of

procedural unfairness, not substantive fairness alone.

It should also be noted that in section 51ACA TPA, relating to industry codes of

conduct, B2B is included to the extent that franchising is included as an industry.

The introduction of the Contracts Review Bill into the NSW Parliament in 1978

provoked a storm of outrage, particularly because the operation of the Act would

cover all contracts, not merely consumer contracts. As a result, the Bill was

withdrawn and reintroduced in an amended form.

53

It has been argued that the Act should have also applied to business contracts for the

following reasons:

• the legislation brings a confusing and arbitrary division in the law of contracts

because there is little difference between an individual consumer, partnership of

individuals or a small proprietary company. In each case there will often be a lack

of sophistication in legal matters and no ready access to legal advice. Indeed, the

financial and commercial pressures faced by the small businessperson may make

him/her even more vulnerable than the consumer; and

• the problem of the abuse of superior bargaining power, which is at the root of

unconscionability, is not selective and even large corporations and government

instrumentalities are not immune to exploitation.

The Law Commissions’ Paper took the provisional view with respect to the UK

However, it was considered that this would be limited to terms which have either not

been negotiated or are standard. The same formulation in relation to the inclusion of

adequacy of price and main subject matter would apply as to B2C transactions.

They did ask the question as to the desirability and practicality of extending the

preventive controls over unfair terms to B2B.

• Standard form contracts are widely used in B2B transactions for the supply of

goods and services and cause problems similar to those affecting consumer

contracts.

• In many cases businesses will have a restricted choice of supplier each

offering contracts with identical or similar terms.

• Businesses may have little or no understanding of the terms on which they are

being invited to contract.

• Businesses often have insufficient financial resources to enforce other

remedies where unfair terms are used e.g. unconscionable conduct.

• Business, particularly small business is treated as a consumer for other

purposes in other legislation e.g. Consumer Claims Act 1994 (NSW).

• Prohibiting terms in consumer contracts while allowing identical terms in B2B

contracts may put small businesses at a disadvantage.

• There may be difficulty in determining in some cases whether a party is

contracting as a consumer or as a business e.g. vehicles bought for both

purposes.

• Unfair terms provisions constitute preventative protection for business and

lessen the likelihood of disputes occurring.

54

• The commercial character of the contract.

• Greater knowledge of contractual terms and principles relative to consumers.

• Greater resources to obtain legal advice and enforce other legal and

contractual remedies.

• Collective bargaining power and resources of industry associations.

• Additional compliance costs of publicly funded agencies.

• Business may be able to insure against loss or pass cost incurred as a

consequence of an unfair term.

• Business has a greater opportunity to negotiate terms than consumers have.

The costs and benefits of covering B2B would be generally similar to those for

business-consumer contracts. However, this will be affected by whether or not B2B

contracts are regulated in exactly the same way as business-consumer contracts and

the degree to which government might intervene in this situation.

Question 40:

a. In principle, should any unfair terms legislation apply to B2B contracts as well

as consumer contracts? Why/why not?

b. Should any such legislation apply to all B2B contracts or just those involving

small business – and how would ‘small business’ be defined?

c. If B2B contracts were to be included, should the legislation apply to

individually negotiated contracts/terms or only standard form contracts/terms?

Why/why not?

d. If B2B contracts were covered should the remedies be the same as for

consumers?

e. What, if any, enforcement role and functions should fair trading agencies have

if B2B contracts were covered?

f. Would extending the unfair provisions to B2B contracts simply duplicate

existing protections e.g. unconscionable conduct, commercial tenancy

legislation etc? Please detail.

g. What types of contract might be excluded from coverage? (For example:

insurance contracts, telecommunications contracts, contracts for the transfer of

land, securities, copyright?)

h. (i) Should adequacy of price be excluded for any B2B contract regulation?

(ii) Are there other matters which should be excluded? Please detail.

i. Should unfair terms be prescribed in any regime to regulate B2B contracts if

there is an ability to prescribe for consumer contracts? Why/Why not?

j. Should the onus of proof in the B2B context be on the business disputing the

fairness of the term? Why/why not?

k. How might section 51AC TPA be affected by the composite model?

l. What do you consider the costs/benefits : advantages/disadvantages to be in

regulating unfair contract terms in relation to B2B?

55

56

(1) In these Regulations –

“consumer” means any natural person who, in contracts covered by these Regulations, is acting for

purposes which are outside his trade, business or profession;

“seller or supplier” means any natural or legal person who, in contracts covered by these Regulations,

is acting for purposes relating to his trade, business or profession, whether publicly owned or privately

owned;

“unfair terms” means the contractual terms referred to in regulation 5.

Criticisms made of the EU provision include the difficulty of knowing whether a

person is or is not acting for purposes relating to their trade, business or profession.

This may be a different test to ‘in the course of’ their business. It was also suggested

that it be made clear that it covers the situation where a consumer sells their car to a

32U. Definitions

For the purposes of this Part--

consumer", in relation to a consumer contract, means a person to whom goods or services have been

or are to be supplied under the contract;

"prescribed unfair term" means a term that is prescribed by the regulations to be an unfair term or a

term to the like effect;

"standard form contract" means 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;

contrary.

57

"consumer contract" an agreement whether or not in writing and whether of specific or general use,

to supply, in trade or commerce, goods or services of a kind ordinarily acquired for personal, domestic

or household use, for the purposes of the ordinary personal, household or domestic use of those goods

or services.

"standard form contract" means a consumer contract that has been drawn up for general use in a

particular industry or for general use by a supplier, whether or not the contract differs from other

contracts used in that industry or by that supplier.

The Working Party made the preliminary recommendation that the Victorian

definition of “consumer contract” be amended as indicated in order to ensure that

private contracts are not caught by the legislation.

Since some individual suppliers, particularly bigger operators, may have contracts

which apply only to their business, not the industry in which they operate, it is also

recommended that the definition of “standard form contract” should be amended

accordingly.

It is also noted that under the Victorian legislation, a reference to “services” includes

interests in land. Not all jurisdictions cover land generally in their fair trading

legislation. The Working Party agreed that in principle contracts in relation to land

should be covered by UCT provisions but that the matter should be further considered

by each jurisdiction before a conclusion is reached on this point.

Question 9:

Do you have any comments on the general definitions above?

Question 10:

a) Should private contracts be covered?

b) Should reference be made to standard form contracts used by a particular

supplier?

c) Should contracts in relation to interests in land be covered by the legislation?

In each case, why or why not?

(1) These Regulations apply in relation to unfair terms in contracts concluded between a seller or a

supplier and a consumer.

(2) These Regulations do not apply to contractual terms which reflect –

(a) mandatory statutory or regulatory provisions (including such provisions under the law of any

Member State or in Community legislation having effect in the United Kingdom without further

enactment);

(b) the provisions or principles of international conventions to which the Member States or the

Community are party.

58

exclusion of mandatory provisions (for example, terms required by law) into their

legislation and that this had not proved problematic and therefore questioned the need

retention of the exclusions but considered that they should be redrafted to make it

clear that the exclusions apply to:

(a) all terms whose use is required or expressly permitted by law, but only to the

extent that they do not go beyond what is required or permitted;

(b) terms which are in substance simply the ‘default rules’ which would apply

where there is no express clause on the subject;

(c) terms that are approved in advance by an independent regulator who has a

duty to protect the interests of consumers.

The Law Commissions’ Paper considered that terms which reflect the position of the

law if there was no contrary agreement should only be exempt if the terms are in plain

language and that terms required by regulators should be exempt, but not those

merely approved by them.

32V. Application of Part

This Part does not apply to contractual terms-

(a) contained in a contract to which the Consumer Credit (Victoria) Act 1995 applies;

(b) that are required or expressly permitted by law, but only to the extent required or permitted.

This Part does not apply to contractual terms –

(a) contained in a contract to which the Consumer Credit (Victoria) Act 1995 applies

(b) that are required or expressly permitted by law, but only to the extent required or

permitted.

As noted previously, the UCCC is uniform across all State and Territory jurisdictions

and there is already a capacity to re-open unjust credit contracts. It is arguable that the

same considerations regarding substantive unfair terms in consumer contracts

generally apply to unfair terms in consumer credit contracts. Exempting consumer

credit contracts from general unfair contract terms regulation may send the wrong

message to credit providers about unfair terms and may encourage other industries to

seek exemptions on the basis that there is other legislation or another consultation

process dealing with their contracts. The preliminary recommendation of the Working

Party was that consumer credit contracts (which are currently governed by the UCCC)

should not be excluded from general unfair terms legislation.

However, it is also noted that by virtue of sections 58 to 64 UCCC, endorsement is

given to unilateral change clauses provided that they comply with certain procedures.

On the face of it, this would seem to run contrary to general unfair terms provisions.

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This does raise the potential for some industry specific difficulties where there is

general legislation.

Question 11:

Do you have any comments on the applicability of unfair terms provisions?

Question 12:

Should consumer credit contracts be covered by general unfair terms legislation?

Why/why not?

(1) A contractual term which has not been individually negotiated shall be regarded as unfair if,

contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and

obligations arising under the contract, to the detriment of the consumer.

drafted in advance and the consumer has therefore not been able to influence the substance of the term

(3) Notwithstanding that a specific term or certain aspects of it in a contract has been individually

negotiated, these Regulations shall apply to the rest of a contract if an overall assessment of it indicates

(4) It shall be for any seller or supplier who claims that a term was individually negotiated to show that

it was.

(5) Schedule 2 to these Regulations contains an indicative and non-exhaustive list of the terms which

may be regarded as unfair.

(1) Without prejudice to regulation 12, the unfairness of a contractual term shall be assessed, taking

into account the nature of the goods or services for which the contract was concluded and by referring,

at the time of conclusion of the contract, to all the circumstances attending the conclusion of the

contract and to all the other terms of the contract or of another contract on which it is dependent.

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32W. What is an unfair term?

A term in a consumer contract is to be regarded as unfair if, contrary to the requirements of good faith

and 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.

32X. Assessment of unfair terms

Without limiting section 32W, in determining whether a term of a consumer contract is unfair, a court

or the Tribunal may take into account, among other matters, whether the term was individually

negotiated...............

"standard form contract" means 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)

32W. What is an unfair term?

A term in a consumer contract is to be regarded as unfair if, contrary to the requirements of good faith

and in all the circumstances, it causes a significant imbalance in the parties’ rights and obligations

There are 3 matters of significance with respect to what is regarded as an unfair term:

(a) should legislation be limited to terms which have not been individually

negotiated as in the UK? That is, should this be a threshold matter or a factor

to be taken into consideration as in the Victorian provisions?

(b) the use of the term ‘good faith’ (UK and Victoria); and

(c) the use of the phrase ‘in all the circumstances’ (Victoria).

• Individually negotiated terms

Again, the EU review report found that a number of member states had not limited

their provisions to non-negotiated terms and had not experienced problematic

consequences. The UK Government’s response to the review recommended that

individually negotiated terms should be included provided that they would not be

regarded as unfair if the trader had taken reasonable steps to ensure that the consumer

understood what was agreed and the foreseeable consequences. Not surprisingly,

however, in the United Kingdom businesses generally were not in favour of such a

proposal and consumer associations were.

In relation to individually negotiated terms the arguments against the application of

unfair terms provisions include the following:

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existence of opportunity to negotiate terms and freedom to refuse to contract

on unacceptable terms;

operation of market forces where persons seeking to contract on unreasonable

terms will exit market;

regulation unnecessary to protect legitimate interests of contracting parties as

they are able to do so themselves;

existence of other legal protections such as unconscionable conduct,

misleading and deceptive conduct, implied warranties, limitations on the legal

effect of certain disclaimers and exclusion clauses etc;

unnecessary interference with freedom to contract;

existence of industry specific legislation to provide required protection where

necessary e.g. UCCC, Insurance Contracts Act 1984 (Clth); and

introduction of unnecessary uncertainty into contracting through the use of a

“fairness test” (a term that may be unfair in one circumstance may not be

unfair in another).

A number of arguments are put forward in support of the application of unfair terms

provisions also applying to individually negotiated contracts. In many cases these are

the same as the arguments put forward in support of unfair terms regulation per se.

These include:

the issue is the fairness of the term in all the circumstances surrounding the

making of the contract - whether it was individually negotiated is but one

circumstance to be taken into account;

inequality of bargaining power preventing “real and meaningful” bargaining

or negotiation;

freedom to contract may not really exist in any event: public policy

considerations; common law doctrines and principles such as with respect to

penalty clauses; equitable doctrines such as unconscionability and fraud; and a

variety of statutory provisions such as Sale of Goods legislation;

complexity of contracts and inability to fully understand all terms even those

which have been “negotiated”;

an individual negotiation of a term is but one circumstance to be taken into

account in determining whether a term is unfair in all the circumstances;

increased certainty of contract; and

ineffectiveness of other protections and remedies such as prohibitions against

unconscionable conduct etc.

The Working Party took the preliminary view that, in accordance with the Victorian

provisions, the issue of whether a term was individually negotiated should not be a

threshold matter. The fact that a term may not have been drafted in advance does not

mean that a consumer will have properly been able to understand it and its effect.

Since a power imbalance may still remain, it cannot be said definitively that there has

been real negotiation.

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Question 13:

Should terms which have been individually negotiated be capable of challenge on the

grounds that they are unfair? Why/why not?

on the consumer (or the regulator under section 32Z below) to show that a contract is

a standard form contract. Where a term is prescribed under the provisions, once it has

been shown that it is in a standard form contract, the term is unfair ‘per se’.

5(4) - places the onus upon the trader to prove that a term was individually

negotiated.

The UK test of drafted in advance is a relatively easy concept to prove from an

evidentiary standpoint and appears to be broader in its application than the current

concept of standard form contract.

Evidentially, it may be helpful if the concept of 'drafted in advance' was adopted.

Further, from an evidentiary point of view, there is merit in considering reversing the

onus of proof in relation to ‘standard from contract’ or ‘drafted in advance’ such that

the trader is required to prove that a term or contract was individually negotiated,

rather than the consumer being required to prove that the term or contract was not

individually negotiated.

Question 14:

Should the concept of 'drafted in advance' be adopted? Why/why not?

Question 15:

Should the onus of proving that a contract was individually negotiated rest with the

trader or the consumer? Why/why not?

The UK and Victorian provisions contain a reference to “good faith”. The original

1994 UK Regulations set out in a Schedule the factors which were to be taken into

account in assessing “good faith”:

(a) the strength of the bargaining positions of the parties;

(b) whether the consumer had an inducement to agree to the term;

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(c) whether the goods or services were sold or supplied to the special order of the

consumer, and

(d) the extent to which the seller or supplier has dealt fairly and equitably with the

consumer.

This list does not appear in the 1999 Regulations. The UK OFT does not equate “good

faith” with an absence of “bad faith”. The criteria it uses are:

transparency: the way in which details of the contract are disclosed to

the consumer;

the availability of information prior to the contract enabling consumers

to make an informed choice;

granting of cooling off periods without penalty;

warnings advising consumers to read the contract before signing; and

the terminology does not require legal advice.

In the UK, there has been considerable debate about the correct interpretation of

section 5 of the Unfair Terms in Consumer Contracts Regulations 1999, which sets

out the basic validity test for an unfair term. The debate has turned on the

interrelation of the "contrary to good faith" and the "significant imbalance" criteria.

Considering the wording of section 5 in isolation, the correct interpretation would

appear to be that "contrary to the requirements of good faith" and "significant

imbalance" are two separate but equal requirements under the UK Regulations, the

first addressing issues of procedural fairness and the second, substantive fairness. On

this view, both elements would have to be established before a term could be regarded

as unfair within the meaning of the legislation.

Scottish Law Commission (DP no. 119), August 2002.

"contrary to the requirements of good faith" and "significant imbalance" are two separate but equal

requirements, the first addressing issues of procedural fairness and the other of substantive

fairness. Both elements must be present;

"significant imbalance" is in the nature of a threshold requirement only (insignificant imbalances

are excluded, as are situations where the balance is in the consumer's favour). On this view, the

"good faith" test can and should be read as an entirely substantive test;

conversely, the critical test is whether there is a significant imbalance to the detriment of the

consumer. On this view, the reference to good faith is no more than a "bow in the direction of

[the] origins" of unfair terms regulation in German jurisprudence;

finally, it is suggested that there are two routes to unfairness. A term that itself causes a significant

imbalance will be contrary to "good faith" and hence unfair. A term that appears in its substance

not to have such an effect may in fact also be unfair if there has been a lack of procedural good

faith. This approach allows for both procedure and substance to be considered, but allows certain

terms to be ruled unfair per se.

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The problem with this approach, however, is that it is not consistent with aspects of

the UK Regulations that require, in effect, that substantive unfairness alone can make

view that substantive unfairness alone can make a term unfair under UTCCR.

As far as the issue under discussion is concerned, there is no material difference

between the UK Regulations and Part 2B—Unfair Terms in Consumer Contracts

incorporated into the Victorian Fair Trading Act 1999 in 2003. Like their UK model,

the Victorian provisions are not limited to providing individual consumers with a

mechanism for challenging particular contractual terms. They also seek to combat the

use of unfair terms in consumer and standard form contracts generally and, to this

end, give the Director pre-emptive power to seek injunctions to stop the use of terms

commitment to abstract control by the provision it makes for terms to be prescribed as

unfair by regulation.

On the basis of the UK experience, it is suggested that the incorporation of a "good

faith" requirement in model unfair terms legislation is likely to produce confusion in

relation to the abstract control objective, and to require a good deal of tendentious

role or function such a requirement would serve, particularly in the context of the

Australian legislative framework. This last point is further considered in the next

section.

The UK Regulations (and the EC Directive from which they have been "carved out")

arguably represent an attempt to regulate situations involving either substantive or

procedural unfairness, or both. At least one of the four interpretations referred to

above suggests that the UK Regulations ought to be read as providing, in essence, two

injunction under the section can extend to any similar terms, or terms having like effect, as used or

recommended by any person: 32ZA(4).

therein. Not surprisingly, perhaps, the Paper provisionally proposes a new test of validity which does

not include explicit reference to good faith. At para. 4.94, it states:

We provisionally propose that the basic test in the new legislation should be whether, judged by

reference to the time the contract was made, the term is a fair and reasonable one; and that it is

not necessary to include an explicit reference to good faith.

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A "two routes" approach makes sense in the UK context where, it is understood, there

is no equivalent to the statutory unconscionable conduct regimes found in Part IVA,

TPA and mirror provisions of the State fair trading legislation. In the Australian

context, however, where procedural unfairness is clearly dealt with by these existing

regimes, coverage of procedural unfairness within an unfair contract terms legislative

framework would create unnecessary duplication. It would also be potentially quite

confusing given that the relation between the unconscionable conduct and good-faith

standards is, arguably, far from clear. (Presumably, "the requirements of good faith"

are more demanding than the prohibition against acting unconscionably, but this is

difficult territory, particularly given the uncertainty surrounding the concept of good

faith in Australian law, discussed above.)

Recognising the differences between the UK and Australian contexts, the Victorian

legislation has appropriately removed most of the procedurally-focussed elements of

its model. However, it is argued that the "contrary to the requirements of good faith"

requirement is a further element of this kind. In the interests of clearly distinguishing

the role of unfair contract terms legislation from that of the unconscionable conduct

regimes—among other considerations—it should also be removed.

even less sense than the "two routes" approach against the background of Australian

jurisdictions' unconscionable conduct regimes. Under those regimes, although the

court's attention is directed to substantive as well as procedural factors as potentially

relevant, there is no doubt that conduct may be impugned on the basis of procedural

requiring that both procedural and substantive unfairness be established. This

consideration is additional to the issue of inconsistency with the abstract control

objective, as discussed above. Again, the point is the lack of a clear role for a good

faith requirement.

Question 16:

Should a concept of “good faith” be included when determining whether a contractual

term is unfair? Why/Why not?

The Working Party similarly considered that the use of the phrase “in all the

circumstances” has the ability to include procedural issues and for the reasons

outlined above in relation to “good faith”, this would be neither necessary nor

Question 17:

Should a reference to “all the circumstances” of the contract be included when

determining whether a contractual term is unfair? Why/Why not?

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(1) Without prejudice to regulation 12, the unfairness of a contractual term shall be assessed, taking

into account the nature of the goods or services for which the contract was concluded and by referring,

at the time of conclusion of the contract, to all the circumstances attending the conclusion of the

contract and to all the other terms of the contract or of another contract on which it is dependent.

(2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate –

(a) to the definition of the main subject matter of the contract, or

(b) to the adequacy of the price or remuneration, as against the goods or services supplied in exchange.

SCHEDULE 2 Regulation 5(5)

1 Terms which have the object or effect of –

(a) excluding or limiting the legal liability of a seller or supplier in the event of the death of a consumer

or personal injury to the latter resulting from an act or omission of that seller or supplier;

(b) inappropriately excluding or limiting the legal rights of the consumer vis-à-vis the seller or supplier

or another party in the event of total or partial non-performance or inadequate performance by the

seller or supplier of any of the contractual obligations, including the option of offsetting a debt owed to

the seller or supplier against any claim which the consumer may have against him;

(c) making an agreement binding on the consumer whereas provision of services by the seller or

supplier is subject to a condition whose realisation depends on his own will alone;

(d) permitting the seller or supplier to retain sums paid by the consumer where the latter decides not to

conclude or perform the contract, without providing for the consumer to receive compensation of an

equivalent amount from the seller or supplier where the latter is the party cancelling the contract;

(e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in

compensation;

(f) authorising the seller or supplier to dissolve the contract on a discretionary basis where the same

facility is not granted to the consumer, or permitting the seller or supplier to retain the sums paid for

services not yet supplied by him where it is the seller or supplier himself who dissolves the contract;

(g) enabling the seller or supplier to terminate a contract of indeterminate duration without reasonable

notice except where there are serious grounds for doing so;

(h) automatically extending a contract of fixed duration where the consumer does not indicate

otherwise, when the deadline fixed for the consumer to express his desire not to extend the contract is

unreasonably early;

(i) irrevocably binding the consumer to terms with which he had no real opportunity of becoming

acquainted before the conclusion of the contract;

(j) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason

which is specified in the contract;

(k) enabling the seller or supplier to alter unilaterally without a valid reason any characteristics of the

product or service to be provided;

(l) providing for the price of goods to be determined at the time of delivery or allowing a seller of

goods or supplier of services to increase their price without in both cases giving the consumer the

corresponding right to cancel the contract if the final price is too high in relation to the price agreed

when the contract was concluded;

(m) giving the seller or supplier the right to determine whether the goods or services supplied are in

conformity with the contract, or giving him the exclusive right to interpret any term of the contract;

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(n) limiting the seller’s or supplier’s obligation to respect commitments undertaken by his agents or

making his commitments subject to compliance with a particular formality;

(o) obliging the consumer to fulfil all his obligations where the seller or supplier does not perform his;

(p) giving the seller or supplier the possibility of transferring his rights and obligations under the

contract, where this may serve to reduce the guarantees for the consumer, without the latter’s

agreement;

(q) excluding or hindering the consumer’s right to take legal action or exercise any other legal remedy,

particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal

provisions, unduly restricting the evidence available to him or imposing on him a burden of proof

which, according to the applicable law, should lie with another party to the contract.

2 Scope of paragraphs 1(g), (j) and (l)

(a) Paragraph 1(g) is without hindrance to terms by which a supplier of financial services reserves the

right to terminate unilaterally a contract of indeterminate duration without notice where there is a valid

reason, provided that the supplier is required to inform the other contracting party or parties thereof

immediately.

(b) Paragraph 1(j) is without hindrance to terms under which a supplier of financial services reserves

the right to alter the rate of interest payable by the consumer or due to the latter, or the amount of other

charges for financial services without notice where there is a valid reason, provided that the supplier is

required to inform the other contracting party or parties thereof at the earliest opportunity and that the

latter are free to dissolve the contract immediately.

Paragraph 1(j) is also without hindrance to terms under which a seller or supplier reserves the right to

alter unilaterally the conditions of a contract of indeterminate duration, provided that he is required to

inform the consumer with reasonable notice and that the consumer is free to dissolve the contract.

(c) Paragraphs 1(g), (j) and (l) do not apply to:

– transactions in transferable securities, financial instruments and other products or

services where the price is linked to fluctuations in a stock exchange quotation or index or a financial

market rate that the seller or supplier does not control;

– contracts for the purchase or sale of foreign currency, traveller’s cheques or international money

orders denominated in foreign currency.

(d) Paragraph 1(1) is without hindrance to price indexation clauses, where lawful, provided that the

method by which prices vary is explicitly described.

Without limiting section 32W, in determining whether a term of a consumer contract is unfair, a court

or the Tribunal may take into account, among other matters, whether the term was individually

negotiated, whether the term is a prescribed unfair term and whether the term has the object or effect

of—

(a) permitting the supplier but not the consumer to avoid or limit performance of the contract;

(b) permitting the supplier but not the consumer to terminate the contract;

(d) permitting the supplier but not the consumer to vary the terms of the contract;

(e) permitting the supplier but not the consumer to renew or not renew the contract;

(f) permitting the supplier to determine the price without the right of the consumer to terminate the

contract;

(g) permitting the supplier unilaterally to vary the characteristics of the goods or services to be supplied

is to be amended.

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under the contract;

(h) permitting the supplier unilaterally to determine whether the contract had been breached or to

interpret its meaning;

(i) limiting the supplier's vicarious liability for its agents;

(j) permitting the supplier to assign the contract to the consumer's detriment without the consumer's

consent;

(k) limiting the consumer's right to sue the supplier;

(l) limiting the evidence the consumer can lead in proceedings on the contract;

(m) imposing the evidential burden on the consumer in proceedings on the contract.

32Z. Offences relating to prescribed unfair terms

(1) A supplier must not use in relation to a consumer a standard form contract containing a prescribed

unfair term.

Penalty: 10 penalty units, in the case of a natural person.

20 penalty units, in the case of a body corporate.

(2) A person must not attempt to enforce a prescribed unfair term in a standard form contract whether

entered into before or after the term is prescribed.

Penalty: 10 penalty units, in the case of a natural person.

20 penalty units, in the case of a body corporate.

32X:

(1) Without limiting section 32W, in determining whether a term of a consumer

contract is unfair, a court or the Tribunal may shall take into account, among other

matters:

(a) the nature of the goods or services to which the contract relates

(b) all the other terms of the contract

(c) any other contract or term in a contract on which the contract containing the

subject term is dependent

(d) whether the term was individually negotiated

(e) whether the term is a prescribed term

(f) whether the term has the object or effect of – [list (a) – (m) as currently in 32X]

(n) permitting a supplier but not a consumer to restrict, remove or limit legal liability

under the contract

(2) The court or Tribunal may take into account all such other matters as it considers

appropriate.

The Working Party took the preliminary view that the court should be directed, not

simply enabled, to take certain matters into account in making its assessment in order

to ensure clarity and consistency. It was also of the view that the matters to be taken

into account should include, as stated in the UK provisions, the nature of the goods or

services and all the other terms of the contract or of another contract on which it is

dependent. The ‘offending’ term should be placed in the context of the whole contract

as it is possible that a term which on its own appears unfair, may, in that context, and

for the industry to which it relates, be quite reasonable. As noted previously, however,

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the Working Party was not in favour of a reference to ‘all the circumstances attending

the conclusion of the contract’, also included in the UK provision.

Question 18:

Should the courts be mandated or enabled to take the matters listed in the Victorian

provision into account? Please give reasons.

Question 19:

Do you have a preference for the style of list in the Victorian provision or in the

Schedule to the UK Regulations? Please give reasons.

A significant difference between the UK and Victorian approaches is that in the UK

version, the main subject matter of the contract and the price are excluded from an

assessment of unfairness provided that such clauses are in plain, intelligible language.

It should be noted that 7 of the 15 EU Member States have not transposed Article 4 of

It should be noted that the exemption as to price is only as to its adequacy, that is, the

price/quality ratio. Thus many other terms which are relevant to price, such as the

manner in which a price might be altered, are subject to the Directive/UK

Regulations.

The EU review report, considered that, generally, the price and the subject matter of

the contract (often referred to as ‘core’ provisions) do not raise difficulties resolvable

by unfair terms regulation. However, the wording of Article 4 itself was causing some

interpretive problems. Insurance was cited as an example: is a term excluding a

specified risk from a contract a term as to the subject matter of the contract (which

would not be covered by the Directive) or a term limiting liability (which would be

covered). The European Commission therefore posed the question as to whether these

limitations on the applicability of the Directive should be removed.

The Economic and Social Committee of the EU considered that the exclusions as to

Implementation of Council Directive 93/13/EEC on Unfair Terms in Consumer Contracts” - Official

Journal of the European Communities (2001/C 116/25

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UK commentators have remarked that the exclusion of the core terms has created

some difficulties.

main subject matter. The OFT UK has taken the view that the only terms that can

terms before the contract is entered into.

In response to the EU review report, the UK Department of Trade and Industry

protection in the UK) requested input from the UK community. All business

respondents wanted to continue with the exclusion as it currently stands. They

believed that to remove it would considerably increase complaints. However, all the

consumer bodies and some trading standards organisations saw no reason why the

core terms should not be subject to a ‘fairness test’. Problems which could then be

corrected include the excessive charging of elderly people by tradespersons.

The response of the UK Government (as expressed through DTI) was that it preferred

Londonderry, Northern Ireland – Annexe to Minutes for Proceedings of the Conference The "Unfair

Terms Directive": 5 years on - 1-3 July 1999

Paper No 166); The Scottish Law Commission (Discussion Paper No 119) July 2002

Consultation Paper – DTI, Consumer and Competition Policy Directorate.

71

It also preferred to retain the exemption as to the price/quality ratio because prices can

vary considerably. However, in recognition of the abuse of some vulnerable groups,

The Law Commissions’ Paper considered that a reason for not reviewing such clauses

is that they are less likely to be a surprise to consumers as they are more likely to be

aware of these terms and understand them, providing that they are in plain language.

They concurred that it will depend on the way that the ‘deal’ is presented to the

consumer.

The Law Commissions’ Paper has provisionally proposed that both exemptions be

retained in the following manner:

(1) The new legislation should exclude the main subject matter from the scope of

review, but

(2) only in so far as

(a) it is not substantially different from what the consumer should reasonably

expect, and

(b) it is stated in plain language (and is otherwise “transparent”………..)

The adequacy of the price should not be reviewable under the legislation, where

(1) having to make the payment, or the way in which it is calculated, is not

substantially different from what the consumer, in the light of what he was told when

or before the contract was made and all the other circumstances, should reasonably

expect, and

(2) the price is not one contained in a subsidiary term, provided that the price is stated

in plain language (and is otherwise “transparent”………………)

The Working Party remains divided on the issue of exclusion of price. The majority

of the group favoured the Law Commissions’ Paper recommendation. However, there

is concern that this is not sufficient to cover, in particular, the difficulties which can

be experienced by those living in regional and remote Australia. As one member of

the group noted, it is not desirable to be able to dispute the price of a business shirt in

David Jones in Canberra: however, it may be a different matter where there is little, if

any competition, in the supply of goods and services in a regional area and higher

prices are less a question of the extra cost of providing the goods and services in this

Question 20:

(a) Should adequacy of price and/or the main subject matter be included in or

excluded from coverage of unfair terms regulation? (b) If they should be excluded,

what limits, if any, should be placed on that exclusion?

or services are not relevant to an assessment as to whether a term of a Contract is unfair (clause 4.2.2).

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Almost all respondents to the UK DTI consultation paper with respect to the EU

including being re-drafted in plain English! In addition, a mechanism to update the list

would be useful. Some respondents believed that not all terms should be regarded

equally – some matters should always be considered as unfair and put on a “black”

list, for example, terms excluding liability for death or personal injury caused by the

fault of the other party; penalty clauses; whole agreement clauses; and restrictions on

legal remedies. Alternatively, some terms could be presumed to be unfair unless

business could show that they were fair. As a result, the UK Government’s response

to the review was that the list should be amended to improve its clarity and impact

(also recommended by the European Commission in its response); a mechanism

should be introduced to allow it to be updated; and there should be a black list of

terms which are void in all circumstances. The Law Commissions’ Paper took a

similar position.

The Working Party considered that the Victorian version of the model has gone some

way to addressing these matters. The list included in section 32X is significantly more

understandable than the current UK list. The ability to prescribe terms effectively

provides for a ‘black’ list, and, in addition, there is a penalty for their use which gives

the legislation significant teeth. The use of regulation to prescribe the void terms

means that there is a mechanism to update the ‘black’ list. There is no mechanism to

update the general list and it was recommended that there be a regulation power in

this respect, too. The Working Party did consider that there may be other matters

which should be included in section 32X, for example, that noted as (n) in the

Working Party alternative above.

Question 21:

(a) Is the Victorian version of the UK model preferable in this respect? (b) Would you

recommend any further changes?

Question 22:

Are there other matters which should be included in the list in section 32X?

(1) An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding

on the consumer.

(2) The contract shall continue to bind the parties if it is capable of continuing in existence without the

unfair term.

would be helpful if there were more focussed indicative terms here.

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32Y. Effect of unfair term

(1) An unfair term in a consumer contract is void.

(2) A prescribed unfair term in a standard form contract is void.

(3) The contract will continue to bind the parties if it is capable of existing without the unfair term or

the prescribed unfair term.

(4) Sub-section (1) applies to any consumer contract entered into on or after the commencement of

section 12 of the Fair Trading (Amendment) Act 2003.

(5) Sub-section (2) applies to any standard form contract whether entered into before or after the term

is prescribed.

32Z. Offences relating to prescribed unfair terms

(1) A supplier must not use in relation to a consumer a standard form contract containing a prescribed

unfair term.

Penalty: 10 penalty units, in the case of a natural person.

20 penalty units, in the case of a body corporate.

(2) A person must not attempt to enforce a prescribed unfair term in a standard form contract whether

entered into before or after the term is prescribed.

Penalty: 10 penalty units, in the case of a natural person.

20 penalty units, in the case of a body corporate.

In the EU review report it was noted that the UK sanction as contained in section 8 of

the UK Regulations is quite weak. The Economic and Social Committee in its

response to the EU review report stated that whilst it would not support a criminal

penalty, it did consider that the onus of proof should be reversed with the wronged

party then having to prove the degree of damage suffered. The UK Government in its

response stated that court actions are problematic for consumers: there is no penalty

for detriment caused for prior use. Whilst it did not, in general, favour punitive

damages or criminal penalties, it would be prepared to consider the latter if there was

a “black” list.

As noted in the section above, the Victorian provisions are stronger in this regard.

Question 23:

(a) Do you support the use of criminal sanctions where a term has been prescribed by

regulation? Why/why not? (b) What other mechanism could be used to ensure that the

legislation is taken seriously?

With respect, however, to non-prescribed terms, the Working Party was also

concerned that the sanction of the offending terms being void was not sufficient – or

would not necessarily leave the consumer in a better position and questioned whether

the court should have the ability to vary unfair terms.

It is unclear from the wording of the UK provision whether a court can strike out the

offending parts of a clause and leave the rest, but the Law Commissions’ Paper notes

that it is likely that the court can do this. It notes that it is likely that the court is

entitled under UTCCR to treat a clause as divisible into separate ‘terms’ and to strike

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The UK UCTA does not contain a specific provision on the effect of an exclusion or

restriction being held invalid. Where a term of a contract is held to be invalid, it is

simply of no effect and the parties’ relationship continues as if the term had not been

included in the contract.

The Law Commissions’ Paper concluded, on balance, that a term of a contract which

offends Part I of the UCTA can remain effective, to the extent that it also contains

exclusions or restrictions which do not offend UCTA.

It has been proposed by the Law Commissions’ Paper that, if the UTCCR and UCTA

are replaced by a single piece of legislation, where a term is void under the

legislation, the whole clause should be of no effect to the extent that it is detrimental

to the consumer and the contract should continue to bind the parties if it is capable of

continuing in existence without the unfair term.

In Australia, the CRA empowers the NSW courts with a range of remedies if it finds a

contract to have been unjust in the circumstances relating to the contract at the time it

was entered into. The courts’ powers are discretionary. A party to the contract may

seek relief from a contract or use the provisions of the CRA as a defence.

Section 7 of the NSW CRA, in combination with the ancillary relief provided for in

section 8 and the first schedule to the CRA, provides an extremely wide range of

remedies.

Once it is satisfied that the contract is unjust, the court may, at its discretion, ‘for the

purpose of avoiding as far as practicable an unjust consequence or result’:

refuse to enforce any or all of the provisions of the contract;

make an order declaring the contract void, in whole or in part; and/or

make an order varying, in whole or in part, any provision of the contract.

Any order may have prospective or retrospective effect.

The UCCC provides at sub-section 71(c) that the court can set aside either wholly or

in part or revise or alter an agreement made or mortgage given in connection with the

transaction.

Under the TPA and its equivalents, the courts have a general power to void a contract

or instrument in whole or in part or to vary it.

An examination of the literature on the law of contracts reveals a considerable body of

case law on the issue of void contracts/terms, but very little solely on the issue of the

variation of contract terms by the courts. In general, the courts have been reluctant to

impose a variation upon the parties to a contract and have instead tended to pass the

contract back to the parties to negotiate a variation. It should be noted, however, that

the courts in effect vary contracts every time they sever a term for illegality.

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The Working Party took the preliminary view that the legislation should only provide

for a term found to be unfair to be void. There should not be a power for a

court/tribunal to vary such a term for the reasons set out above, and also because it

was considered that it may create too much uncertainty for business.

However, recognising the weakness of the current provisions, the Working Party also

recommended that there should be remedies in addition to the voiding of a term such

as being able to order the payment of a sum of money found to be owing by one party

to another party; by way of damages; by way of restitution; or to order the refund of

any money paid under a void term. Consumers may be reluctant to take proceedings if

the only outcome is that the term is void and they have suffered some financial

detriment. Similarly, traders might not be sufficiently discouraged from using unfair

terms if the most that could occur is the term being found to be void. The wording of

the Victorian provision does not create a prohibition as such and therefore other

sections in fair trading/consumer protection legislation providing for remedies may

not be activated. It was also considered that other equitable remedies contained in

such sections may not be suitable for unfair contract terms situations.

Question 24:

Should there be a power for a court/tribunal to vary a term or only declare it void?

Please give reasons.

Question 25:

Should there be other remedies available, such as compensation, restitution, damages?

Why/why not? If yes, please detail.

Question 26:

What other sanctions would be appropriate in order to make regulation of unfair terms

effective?

(1) A seller or supplier shall ensure that any written term of a contract is expressed in plain, intelligible

language.

(2) If there is doubt about the meaning of a written term, the interpretation which is most favourable to

the consumer shall prevail but this rule shall not apply in proceedings brought under regulation 12.

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based on the principle of transparency. This principle also includes the ability of the

consumer to obtain all the information they need to make a decision prior to

concluding the contract. It expressed concern that breach of section 7 was not

regarded as unfair and not penalised in any way, since this would only result in the

term being interpreted in the way most favourable to the consumer – which could, in

fact, not be of particular benefit to the consumer.

are understandable to the average consumer applying normal diligence and if they

are not, they should be void.

requirement that contracts be drafted in plain, intelligible language, no further

explanation was required beyond including the legibility of the print. However,

overall, it was agreed that it was essential that terms are easy to read and understand

and the principle could be more detailed. It was noted that there is no standard against

which to judge the requirement.

The UK Government’s position (reported by DTI) supports the approach of the OFT

UK. Contracts must be intelligible to ordinary consumers without referral to legal

advice; they should use normal words with their usual meaning; legal jargon or

terminology which the average consumer would not be familiar with should be

avoided; sentences should be short and the text broken up with appropriate headings;

the print should be of a size and colour that can be read without difficulty.

language was a vital aspect of fairness and that issues of print legibility and the layout

of the document are all important aspects of “transparency”. It therefore provisionally

recommended that transparency should be taken into account when assessing fairness

and remain a condition of exemption of the “core” terms. Whilst failure to be

transparent would not automatically make a term unfair, it should still be possible for

a term to be found to be unfair either solely or principally on that ground. Repetition

Terms in Consumer Contracts – Brussels 27.04.2000 – COM (2000) 248 Final

Implementation of Council Directive 93/13/EEC on Unfair Terms in Consumer Contracts” - Official

Journal of the European Communities (2001/C 116/25)

Consultation Paper – DTI, Consumer and Competition Policy Directorate.

Paper No 166); The Scottish Law Commission (Discussion Paper No 119) July 2002

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Commissions’ Paper considered that it would do no harm to re-iterate it.

The Working Party remained divided on how unclear terms should be treated. On the

one hand, it was argued that the ability to be able to readily read and understand a

contract term is fundamental to fairness in terms of a person having the ability to

understand what they have agreed to and therefore it should be in the list in section

32X(1) of the Victorian provisions. On the other hand, it was argued that a term may

be difficult to read but be entirely fair in its content – illegibility does not go to the

issue of fairness of the term as such: there are two separate issues and should not be

included.

It was recommended that, as a minimum, there should be a general clause in fair

trading legislation similar to the amended section 163 of the Victorian Act. The

Director can seek an order prohibiting a term in breach from future use with a penalty

for non-compliance.

It was further recommended that the contra proferentem rule should be stated in the

provisions. Whilst this may not be strictly necessary, it is useful to state it so that nonlawyers

reading the provisions are made aware of this rule.

The ACIF Guideline goes into some detail as to how contracts should be written so

that they are in plain and intelligible language as well as print colour and size and so

on. It also considers the needs of people from non-English speaking backgrounds and

those with disabilities (clauses 6.1, 6.2 and 6.4). It also states where a written term is

uncertain, the interpretation that is most favourable to the Consumer should prevail.

Question 27:

(a) Should a term be assessed as unfair because of lack of legibility, clarity,

intelligibility, etc? Why/why not? (b) Should there be more detail around what is

required?

Question 28:

Should the contra proferentem rule be set out in the provisions for the purpose of

drawing the attention of suppliers and purchasers to its existence?

As noted previously, the EU left the mechanics of implementing the unfair term

provisions up to each member state. The Working Party took a similar view in terms

of implementing provisions in the various Australian jurisdictions. However, there are

two significant administrative provisions which would benefit from a consistent

approach.

the person who did not draft it.

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(1) It shall be the duty of the Director to consider any complaint made to him that any contract term

drawn up for general use is unfair, unless –

(a) the complaint appears to the Director to be frivolous or vexatious; or

(b) a qualifying body has notified the Director that it agrees to consider the complaint.

(2) The Director shall give reasons for his decision to apply or not to apply, as the case may be, for an

injunction under regulation 12 in relation to any complaint which these Regulations require him to

consider.

(3) In deciding whether or not to apply for an injunction in respect of a term which the Director

considers to be unfair, he may, if he considers it appropriate to do so, have regard to any undertakings

given to him by or on behalf of any person as to the continued use of such a term in contracts

concluded with consumers.

(1) The Director or, subject to paragraph (2), any qualifying body may apply for an injunction

(including an interim injunction) against any person appearing to the Director or that body to be using,

or recommending use of, an unfair term drawn up for general use in contracts concluded with

consumers.

(2) A qualifying body may apply for an injunction only where –

(a) it has notified the Director of its intention to apply at least fourteen days before the date on which

the application is made, beginning with the date on which the notification was given; or

(b) the Director consents to the application being made within a shorter period.

(3) The court on an application under this regulation may grant an injunction on such terms as it thinks

fit.

(4) An injunction may relate not only to use of a particular contract term drawn up for general use but

to any similar term, or a term having like effect, used or recommended for use by any person.

32ZA. Injunctions to prevent continued use of unfair terms

(1) The Director may apply to the Tribunal for an injunction against any person who, in the Director's

opinion, is using, or recommending the use of--

(a) an unfair term in consumer contracts; or

(b) a prescribed unfair term in standard form contracts.

(2) The Tribunal, if it is satisfied that, in all the circumstances, it is just and convenient to do so, may

by order grant an injunction under this section on such terms as it considers appropriate.

(3) Section 123(2) to (7) of the Victorian Civil and Administrative Tribunal Act 1998 applies as if

an injunction under this section were an injunction under that section.

(4) An injunction may relate not only to the use of a particular term in a consumer contract or standard

form contract, but to any similar term or to a term having like effect, used or recommended for use by

any person.

It should be noted that the Victorian Director is enabled to take action whilst the UK

Director is mandated to do so. In addition, “qualifying bodies” may apply for an

injunction against any person using or recommending the use of an unfair term drawn

up for general use in contracts concluded with consumers. The qualifying body must

notify the UK Director of its intention to proceed in this way. The definition of

“qualifying body” in this context includes the Consumers’ Association as well as

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individual industry regulators such as the Director General of Water Services and the

Rail Regulator.

Question 29:

(a) Should other bodies be able to apply for injunctions? (b) Should this include

designated consumer bodies?

(1) The Director may exercise the power conferred by this regulation for the purpose of -

(a) facilitating his consideration of a complaint that a contract term drawn up for general use is unfair;

or

(b) ascertaining whether a person has complied with an undertaking or court order as to the continued

use, or recommendation for use, of a term in contracts concluded with consumers.

(2) A qualifying body specified in Part One of Schedule 1 may exercise the power conferred by this

regulation for the purpose of -

(a) facilitating its consideration of a complaint that a contract term drawn up for general use is unfair;

or

(b) ascertaining whether a person has complied with -

(i) an undertaking given to it or to the court following an application by that body, or

(ii) a court order made on an application by that body, as to the continued use, or recommendation for

use, of a term in contracts concluded with consumers.

(3) The Director may require any person to supply to him, and a qualifying body specified in Part One

of Schedule 1 may require any person to supply to it -

(a) a copy of any document which that person has used or recommended for use, at the time the notice

referred to in paragraph (4) below is given, as a pre-formulated standard contract in dealings with

consumers;

(b) information about the use, or recommendation for use, by that person of that document or any other

such document in dealings with consumers.

(4) The power conferred by this regulation is to be exercised by a notice in writing which may -

(a) specify the way in which and the time within which it is to be complied with; and

(b) be varied or revoked by a subsequent notice.

(5) Nothing in this regulation compels a person to supply any document or information which he would

be entitled to refuse to produce or give in civil proceedings before the court.

(6) If a person makes default in complying with a notice under this regulation, the court may, on the

application of the Director or of the qualifying body, make such order as the court thinks fit for

requiring the default to be made good, and any such order may provide that all the costs or expenses of

and incidental to the application shall be borne by the person in default or by any officers of a company

or other association who are responsible for its default

32ZB. Director may require the supply of information

(1) The Director may exercise the powers conferred under this section for the purposes of--

(a) facilitating the Director's consideration of a complaint that--

(i) a term in a consumer contract is an unfair term; or

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(ii) a term in a standard form contract is a prescribed unfair term; or

(b) ascertaining whether a person has complied with a Tribunal order as to--

(i) the continued use, or recommendation for use of a term in a consumer contract; or

(ii) the continued use of a prescribed unfair term in a standard form contract.

(2) The Director may, by notice in writing, require any person to supply to the Director--

(a) a copy of the document that is the subject of the complaint or order referred to in sub-section (1);

(b) information about the use or recommendation for use by that person of that document in dealings

with consumers.

(3) The notice referred to in sub-section (2) may be varied or revoked by the Director by a subsequent

notice in writing.

(B) A person to whom the notice is addressed must comply with the notice within 14 days of receiving

it.

(5) A person must not, without reasonable excuse, refuse or fail to comply with a requirement of the

Director under this section within the required time.

Penalty: 60 penalty units.

(6) It is a reasonable excuse for a natural person to refuse or fail to give information or do any other

thing that the person is required to do by or under this section, if the giving of the information or the

doing of that other thing would tend to incriminate the person.

(7) Despite sub-section (6), it is not a reasonable excuse for a natural person to refuse or fail to produce

a document that the person is required to produce by or under this section, if the production of the

document would tend to incriminate the person.

Appendix A

This Appendix contains Annex III to the Report from the Commission on the Implementation of

Council Directive 93/13/EEC of April 1993 on Unfair Terms in Consumer Contracts. (Reproduced

with the kind permission of the European Communities)

Appendix A

This Appendix contains Annex III to the Report from the Commission on

the Implementation of Council Directive 93/13/EEC of April 1993 on

Unfair Terms in Consumer Contracts. (Reproduced with the kind

permission of the European Communities)

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Appendix B

This Appendix contains statistics from the UK OFT Unfair Contract Terms Bulletin No. 22 which is

subject to Crown Copyright.

Appendix B

This Appendix contains statistics from the UK OFT Unfair Contract

Terms Bulletin No. 22 which is subject to Crown Copyright.

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104

105

106

107

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English version of the Judiciary of Thailand website.

advance, regardless whether being executed in any form, and is used by either contracting party in his

business operation.

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Contracts Review Act 1980 (NSW)

This Appendix contains many, but not all, sections of the CRA. It does not purport to be an official

version of the legislation. Copyright in relation to the provisions remains with the State of New South

Parliamentary Counsel’s Office.

(1) In this Act, except in so far as the context or subject-matter otherwise indicates or requires:

…………………………………………..

land instrument means an instrument that transfers title to land, creates an estate or interest in land or is

a dealing within the meaning of the Real Property Act 1900.

Tribunal means the Consumer, Trader and Tenancy Tribunal established by the Consumer, Trader and

Tenancy Tribunal Act 2001.

unjust includes unconscionable, harsh or oppressive, and injustice shall be construed in a corresponding

manner.

(2) ………………………

This Act binds the Crown not only in right of New South Wales but also, so far as the legislative power

of Parliament permits, the Crown in all its other capacities.

(1) The Crown, a public or local authority or a corporation may not be granted relief under this Act.

(2) A person may not be granted relief under this Act in relation to a contract so far as the contract was

entered into in the course of or for the purpose of a trade, business or profession carried on by the

person or proposed to be carried on by the person, other than a farming undertaking (including, but not

limited to, an agricultural, pastoral, horticultural, orcharding or viticultural undertaking) carried on by

the person or proposed to be carried on by the person wholly or principally in New South Wales.

(1) Where the Court finds a contract or a provision of a contract to have been unjust in the

circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do

so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or

more of the following:

(a) it may decide to refuse to enforce any or all of the provisions of the contract,

(b) it may make an order declaring the contract void, in whole or in part,

(c) it may make an order varying, in whole or in part, any provision of the contract,

(d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution

of an instrument that:

(i) varies, or has the effect of varying, the provisions of the land instrument, or

(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the

operation or effect of the land instrument.

(2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall

have effect as from the time when the contract was made or (as to the whole or any part or parts of the

contract) from some other time or times as specified in the order.

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(3) The operation of this section is subject to the provisions of section 19.

Schedule 1 has effect with respect to the ancillary relief that may be granted by the Court in relation to

an application for relief under this Act.

(1) In determining whether a contract or a provision of a contract is unjust in the circumstances

relating to the contract at the time it was made, the Court shall have regard to the public interest and to

all the circumstances of the case, including such consequences or results as those arising in the event

of:

(a) compliance with any or all of the provisions of the contract, or

(b) non-compliance with, or contravention of, any or all of the provisions of the contract.

(2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall

have regard shall, to the extent that they are relevant to the circumstances, include the following:

(a) whether or not there was any material inequality in bargaining power between the parties to the

contract,

(b) whether or not prior to or at the time the contract was made its provisions were the subject of

negotiation,

(c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate

for the alteration of or to reject any of the provisions of the contract,

(d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to

comply with or not reasonably necessary for the protection of the legitimate interests of any party to the

contract,

(e) whether or not:

(i) any party to the contract (other than a corporation) was not reasonably able to protect his or her

interests, or

(ii) any person who represented any of the parties to the contract was not reasonably able to protect the

interests of any party whom he or she represented, because of his or her age or the state of his or her

physical or mental capacity,

(f) the relative economic circumstances, educational background and literacy of:

(i) the parties to the contract (other than a corporation), and

(ii) any person who represented any of the parties to the contract,

(g) where the contract is wholly or partly in writing, the physical form of the contract, and the

intelligibility of the language in which it is expressed,

(h) whether or not and when independent legal or other expert advice was obtained by the party

seeking relief under this Act,

(i) the extent (if any) to which the provisions of the contract and their legal and practical effect were

accurately explained by any person to the party seeking relief under this Act, and whether or not that

party understood the provisions and their effect,

(j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the

party seeking relief under this Act:

(i) by any other party to the contract,

(ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the

contract, or

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(iii) by any person to the knowledge (at the time the contract was made) of any other party to the

contract or of any person acting or appearing or purporting to act for or on behalf of any other party to

the contract,

(k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to

which any of them has been a party, and

(l) the commercial or other setting, purpose and effect of the contract.

(3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a

contract if the person represented the party, or assisted the party to a significant degree, in negotiations

prior to or at the time the contract was made.

(4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have

regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the

contract was made.

(5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract

that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in

relation to the performance of the contract since it was made.

Where the Supreme Court is satisfied, on the application of the Minister or the Attorney General, or

both, that a person has embarked, or is likely to embark, on a course of conduct leading to the

formation of unjust contracts, it may, by order, prescribe or otherwise restrict, the terms upon which

that person may enter into contracts of a specified class.

(1) The Court may exercise its powers under this Act in relation to a contract on application made to it

in accordance with rules of court, whether in:

(a) proceedings commenced under subsection (2) in relation to the contract, or

(b) other proceedings arising out of or in relation to the contract.

(2) Proceedings may be commenced in the Court for the purpose of obtaining relief under this Act in

relation to a contract.

(1) Where in proceedings for relief under this Act in relation to a contract it appears to the Court that a

person who is not a party to the contract has shared in, or is entitled to share in, benefits derived or to

be derived from the contract, it may make such orders against or in favour of that person as may be just

in the circumstances.

(2) The Court shall not exercise its powers under this Act in relation to a contract unless it is satisfied:

(a) that the exercise of those powers would not prejudice the rights of a person who is not a party to

the contract, or

(b) that, if any such rights would be so prejudiced, it would not be unjust in all the circumstances to

exercise those powers,

but this subsection does not apply in relation to such a person if the Court has given the person an

opportunity to appear and be heard in the proceedings.

The Minister or the Attorney General, or both, may, at any stage of any proceedings in which relief

under this Act is sought, intervene by counsel, solicitor or agent, and shall thereupon become a party or

parties to the proceedings and have all the rights of a party or parties to those proceedings in the Court,

including any right of appeal arising in relation to those proceedings.

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The Court may grant relief in accordance with this Act in relation to a contract notwithstanding that the

contract has been fully executed.

In any proceedings in which relief under this Act is sought in relation to a contract, the Court may, if it

thinks it proper to do so in the circumstances of the case, and it is of the opinion that the contract forms

part of an arrangement consisting of an inter-related combination or series of contracts, have regard to

any or all of those contracts and the arrangement constituted by them.

An application for relief under this Act in relation to a contract may be made only during any of the

following periods:

(a) the period of 2 years after the date on which the contract was made,

(b) the period of 3 months before or 2 years after the time for the exercise or performance of any

power or obligation under, or the occurrence of any activity contemplated by, the contract, and

(c) the period of the pendency of maintainable proceedings arising out of or in relation to the contract,

being proceedings (including cross-claims, whether in the nature of set-off, cross-action or otherwise)

that are pending against the party seeking relief under this Act.

(1) A person is not competent to waive his or her rights under this Act, and any provision of a contract

is void to the extent that:

(a) it purports to exclude, restrict or modify the application of this Act to the contract, or

(b) it would, but for this subsection, have the effect of excluding, restricting or modifying the

application of this Act to the contract.

(2) A person is not prevented from seeking relief under this Act by:

(a) any acknowledgment, statement or representation, or

(b) any affirmation of the contract or any action taken with a view to performing any obligation arising

under the contract.

(3) This Act applies to and in relation to a contract only if:

(a) the law of the State is the proper law of the contract,

(b) the proper law of the contract would, but for a term that it should be the law of some other place or

a term to the like effect, be the law of the State, or

(c) the proper law of the contract would, but for a term that purports to substitute, or has the effect of

substituting, provisions of the law of some other place for all or any of the provisions of this Act, be the

law of the State.

(4) This Act does not apply to a contract under which a person agrees to withdraw, or not to prosecute,

a claim for relief under this Act if:

(a) the contract is a genuine compromise of the claim, and

(b) the claim was asserted before the making of the contract.

(5) Without affecting the generality of subsection (1), the Court may exercise its powers under this Act

in relation to a contract notwithstanding that the contract itself provides:

(a) that disputes or claims arising out of, or in relation to, the contract are to be referred to arbitration,

or

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(b) that legal proceedings arising out of, or in relation to, the contract are justiciable only by the courts

of some other place.

(1) Where a person submits a document:

(a) that is intended to constitute a written contract,

(b) that has been prepared or procured by the person or on the person’s behalf, and

(c) that includes a provision that purports to exclude, restrict or modify the application of this Act to

the document,

to another person for signature by that other person, the person submitting the document is guilty of

an offence and liable to a penalty not exceeding 20 penalty units.

(2) Proceedings for an offence against subsection (1) shall be disposed of summarily before a Local

Court and may be commenced at any time within 2 years after the offence was committed.

(1) An order made under section 7 (1) (b) or (c) has no effect in relation to a contract so far as the

contract is constituted by a land instrument that is registered under the Real Property Act 1900.

(2) Where an order is made under section 7 (1) (b) or (c) in relation to a contract constituted (in whole

or in part) by a land instrument, not being a land instrument registered under the Real Property Act

1900, the regulations made under this Act may make provision for or with respect to prescribing the

things that must be done before the order, so far as it relates to the land instrument, takes effect.

(3) The Registrar-General and any other person are hereby authorised to do any things respectively

required of them pursuant to subsection (2).

(1) This Act does not apply to a contract of service to the extent that it includes provisions that are in

conformity with an award that is applicable in the circumstances.

(2) In subsection (1), award means a State industrial instrument, or an award or industrial agreement

made under the Conciliation and Arbitration Act 1904 of the Commonwealth.

(3) Schedule 2 has effect.

Nothing in this Act limits or restricts the operation of any other law providing for relief against unjust

contracts, but the operation of any other such law in relation to a contract shall not be taken to limit or

restrict the application of this Act to the contract.

1 Where the Court makes a decision or order under section 7, it may also make such orders as may be

just in the circumstances for or with respect to any consequential or related matter, including orders for

or with respect to:

(a) the making of any disposition of property,

(b) the payment of money (whether or not by way of compensation) to a party to the contract,

(c) the compensation of a person who is not a party to the contract and whose interest might otherwise

be prejudiced by a decision or order under this Act,

(d) the supply or repair of goods,

(e) the supply of services,

(f) the sale or other realisation of property,

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(g) the disposal of the proceeds of sale or other realisation of property,

(h) the creation of a charge on property in favour of any person,

(i) the enforcement of a charge so created,

(j) the appointment and regulation of the proceedings of a receiver of property, and

(k) the rescission or variation of any order of the Court under this clause,

and such orders in connection with the proceedings as may be just in the circumstances.

2 The Court may make orders under this Schedule on such terms and conditions (if any) as the Court

thinks fit.

3 Nothing in section 6 limits the powers of the Court under this Schedule.

4 In this Schedule:

disposition of property includes:

(a) a conveyance, transfer, assignment, appointment, settlement, mortgage, delivery, payment, lease,

bailment, reconveyance or discharge of mortgage,

(b) the creation of a trust,

(c) the release or surrender of any property, and

(d) the grant of a power in respect of property,

whether having effect at law or in equity.

property includes real and personal property and any estate or interest in property real or personal, and

money, and any debt, and any cause of action for damages (including damages for personal injury), and

any other chose in action, and any other right or interest.

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This Appendix contains the relevant sections of the Uniform Consumer Credit Code and is reproduced

Agreements.

Uniform Consumer Credit Code

(1) Power to reopen unjust transactions. The Court may, if satisfied on the application of a debtor,

mortgagor or guarantor that, in the circumstances relating to the relevant credit contract, mortgage or

guarantee at the time it was entered into or changed (whether or not by agreement), the contract,

mortgage or guarantee or change was unjust, reopen the transaction that gave rise to the contract,

mortgage or guarantee or change.

(2) Matters to be considered by Court. In determining whether a term of a particular credit contract,

mortgage or guarantee is unjust in the circumstances relating to it at the time it was entered into or

changed, the Court is to have regard to the public interest and to all the circumstances of the case and

may have regard to the following—

(a) the consequences of compliance, or noncompliance, with all or any of the provisions of the contract,

mortgage or guarantee;

(b) the relative bargaining power of the parties;

(c) whether or not, at the time the contract, mortgage or guarantee was entered into or changed, its

provisions were the subject of negotiation;

(d) whether or not it was reasonably practicable for the applicant to negotiate for the alteration of, or to

reject, any of the provisions of the contract, mortgage or guarantee or the change;

(e) whether or not any of the provisions of the contract, mortgage or guarantee impose conditions that

are unreasonably difficult to comply with, or not reasonably necessary for the protection of the

legitimate interests of a party to the contract, mortgage or guarantee;

(f) whether or not the debtor, mortgagor or guarantor, or a person who represented the debtor,

mortgagor or guarantor, was reasonably able to protect the interests of the debtor, mortgagor or

guarantor because of his or her age or physical or mental condition;

(g) the form of the contract, mortgage or guarantee and the intelligibility of the language in which it is

expressed;

(h) whether or not, and if so when, independent legal or other expert advice was obtained by the debtor,

mortgagor or guarantor;

(i) the extent to which the provisions of the contract, mortgage or guarantee or change and their legal

and practical effect were accurately explained to the debtor, mortgagor or guarantor and whether or not

the debtor, mortgagor or guarantor understood those provisions and their effect;

(j) whether the credit provider or any other person exerted or used unfair pressure, undue influence or

unfair tactics on the debtor, mortgagor or guarantor and, if so, the nature and extent of that unfair

pressure, undue influence or unfair tactics;

(k) whether the credit provider took measures to ensure that the debtor, mortgagor or guarantor

understood the nature and implications of the transaction and, if so, the adequacy of those measures;

(l) whether at the time the contract, mortgage or guarantee was entered into or changed, the credit

provider knew, or could have ascertained by reasonable inquiry of the debtor at the time, that the debtor

could not pay in accordance with its terms or not without substantial hardship;

(m) whether the terms of the transaction or the conduct of the credit provider is justified in the light of

the risks undertaken by the credit provider;

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(n) the terms of other comparable transactions involving other credit providers and, if the injustice is

alleged to result from excessive interest charges, the annual percentage rate or rates payable in

comparable cases;

(o) any other relevant factor.

(3) Representing debtor, mortgagor or guarantor. For the purposes of subsection (2)(f), a person is

taken to have represented a debtor, mortgagor or guarantor if the person represented the debtor,

mortgagor or guarantor, or assisted the debtor, mortgagor or guarantor to a significant degree, in the

negotiations process prior to, or at, the time the credit contract, mortgage or guarantee was entered into

or changed.

(4) Unforeseen circumstances. In determining whether a credit contract, mortgage or guarantee is

unjust, the Court is not to have regard to any injustice arising from circumstances that were not

reasonably foreseeable when the contract, mortgage or guarantee was entered into or changed.

(5) Conduct. In determining whether to grant relief in respect of a credit contract, mortgage or

guarantee that it finds to be unjust, the Court may have regard to the conduct of the parties to the

proceedings in relation to the contract, mortgage or guarantee since it was entered into or changed.

(6) Application. This section does not apply to a change in the annual percentage rate or rates payable

under a contract, or to an establishment fee or charge or other fee or charge, in respect of which an

application may be made under section 72 (Court may review unconscionable interest and other

charges). This section does not apply to a change to a contract under this Division.

(7) Meaning of unjust. In this section, “unjust” includes unconscionable, harsh or oppressive.

The Court may, if it reopens a transaction under this Division, do any one or more of the following,

despite any settlement of accounts or any agreement purporting to close previous dealings and create a

new obligation—

(a) reopen an account already taken between the parties;

(b) relieve the debtor and any guarantor from payment of any amount in excess of such amount as the

Court, having regard to the risk involved and all other circumstances, considers to be reasonably

payable;

(c) set aside either wholly or in part or revise or alter an agreement made or mortgage given in

connection with the transaction;

(d) order that the mortgagee takes such steps as are necessary to discharge the mortgage;

(e) give judgment for or make an order in favour of a party of such amount as, having regard to the

relief (if any) which the Court thinks fit to grant, is justly due to that party under the contract, mortgage

or guarantee;

(f) give judgment or make an order against a person for delivery of goods to which the contract,

mortgage or guarantee relates and which are in the possession of that person;

(g) make ancillary or consequential orders.

72 Court may review unconscionable interest and other charges

(1) The Court may, if satisfied on the application of a debtor or guarantor that—

a) a change in the annual percentage rate or rates under a credit contract to which section 59(1) or (4)

applies; or

(b) an establishment fee or charge; or

(c) a fee or charge payable on early termination of a credit contract; or

(d) a fee or charge for a prepayment of an amount under a credit contract;

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is unconscionable, annul or reduce the change or fee or charge and may make ancillary or

consequential orders.

(2) For the purposes of this section, a change to the annual percentage rate or rates is unconscionable if

and only if it appears to the Court that—

(a) it changes the annual percentage rate or rates in a manner that is unreasonable, having regard to any

advertised rate or other representations made by the credit provider before or at the time the contract

was entered into, the period of time since the contract was entered into and any other consideration the

Court thinks relevant; or

(b) the change is a measure that discriminates unjustifiably against the debtor when the debtor is

compared to other debtors of the credit provider under similar contracts.

(3) In determining whether an establishment fee or charge is unconscionable, the Court is to have

regard to whether the amount of the fee or charge is equal to the credit provider’s reasonable costs of

determining an application for credit and the initial administrative costs of providing the credit or is

equal to the credit provider’s average reasonable costs of those things in respect of that class of

contract.

(4) For the purposes of this section, a fee or charge payable on early termination of the contract or a

prepayment of an amount under the credit contract is unconscionable if and only if it appears to the

Court that it exceeds a reasonable estimate of the credit provider’s loss arising from the early

termination or prepayment, including the credit provider’s average reasonable administrative costs in

respect of such a termination or prepayment.

(1) An application (other than an application under section 72) may not be brought under this Division

more than 2 years after the relevant credit contract is rescinded or discharged or otherwise comes to an

end.

(2) An application under section 72 may not be brought more than 2 years after the relevant change

takes effect or fee or charge is charged under the credit contract or the credit contract is rescinded or

discharged or otherwise comes to an end.

(1) If it appears to the Court that a person other than a credit provider or a mortgagee (a “third party”)

has shared in the profits of, or has a beneficial interest prospectively or otherwise in, a credit contract

or mortgage that the Court holds to be unjust, the Court may make an order about the third party that

the Court considers appropriate.

(2) However, before making an order about the third party, the Court must—

(a) join the third party as a party to the proceedings; and

(b) give the third party an opportunity to appear and be heard in the proceedings.

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This excerpt from legislation of the Parliament of the State of Victoria, Australia, is reproduced with

the permission of the Crown in right of the State of Victoria, Australia. The State of Victoria accepts no

responsibility for the accuracy and completeness of any legislation contained in this publication.

Fair Trading Act 1999 (Victoria)

PART 2B—UNFAIR TERMS IN CONSUMER CONTRACTS

For the purposes of this Part—

"consumer", in relation to a consumer contract, means a person to whom goods or services have been

or are to be supplied under the contract;

"consumer contract" includes a standard form contract;

"injunction" includes interim injunction;

"prescribed unfair term" means a term that is prescribed by the regulations to be an unfair term or a

term to the like effect;

"standard form contract" means 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;

"unfair term" has the meaning given by section 32W and includes a prescribed unfair term.

32V. Application of Part

This Part does not apply to contractual terms—

(a) contained in a contract to which the Consumer Credit (Victoria) Act 1995 applies;

(b) that are required or expressly permitted by law, but only to the extent required or permitted.

A term in a consumer contract is to be regarded as unfair if, contrary to the requirements of good faith

and 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.

Without limiting section 32W, in determining whether a term of a consumer contract is unfair, a court

or the Tribunal may take into account, among other matters, whether the term was individually

negotiated, whether the term is a prescribed unfair term and whether the term has the object or effect

of—

(a) permitting the supplier but not the consumer to avoid or limit performance of the contract;

(b) permitting the supplier but not the consumer to terminate the contract;

(c) penalising the supplier but not the consumer for a breach or termination of the contract;

(d) permitting the supplier but not the consumer to vary the terms of the contract;

(e) permitting the supplier but not the consumer to renew or not renew the contract;

(f) permitting the supplier to determine the price without the right of the consumer to terminate the

contract;

(g) permitting the supplier unilaterally to vary the characteristics of the goods or services to be supplied

under the contract;

(h) permitting the supplier unilaterally to determine whether the contract had been breached or to

interpret its meaning;

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(i) limiting the supplier's vicarious liability for its agents;

(j) permitting the supplier to assign the contract to the consumer's detriment without the consumer's

consent;

(k) limiting the consumer's right to sue the supplier;

(l) limiting the evidence the consumer can lead in proceedings on the contract;

(m) imposing the evidential burden on the consumer in proceedings on the contract.

(1) An unfair term in a consumer contract is void.

(2) A prescribed unfair term in a standard form contract is void.

(3) The contract will continue to bind the parties if it is capable of existing without the unfair term or

the prescribed unfair term.

(4) Sub-section (1) applies to any consumer contract entered into on or after the commencement of

section 12 of the Fair Trading (Amendment) Act 2003.

(5) Sub-section (2) applies to any standard form contract whether entered into before or after the term

is prescribed. 32Z. Offences relating to prescribed unfair terms

(1) A supplier must not use in relation to a consumer a standard form contract containing a prescribed

unfair term.

Penalty: 10 penalty units, in the case of a natural person.

20 penalty units, in the case of a body corporate.

(2) A person must not attempt to enforce a prescribed unfair term in a standard form contract whether

entered into before or after the term is prescribed.

Penalty: 10 penalty units, in the case of a natural person.

20 penalty units, in the case of a body corporate.

(1) The Director may apply to the Tribunal for an injunction against any person who, in the Director's

opinion, is using, or recommending the use of—

(a) an unfair term in consumer contracts; or

(b) a prescribed unfair term in standard form contracts.

(2) The Tribunal, if it is satisfied that, in all the circumstances, it is just and convenient to do so, may

by order grant an injunction under this section on such terms as it considers appropriate.

(3) Section 123(2) to (7) of the Victorian Civil and Administrative Tribunal Act 1998 applies as if an

injunction under this section were an injunction under that section.

(4) An injunction may relate not only to the use of a particular term in a consumer contract or standard

form contract, but to any similar term or to a term having like effect, used or recommended for use by

any person.

32ZB. Director may require the supply of information (1) The Director may exercise the powers

conferred under this section for the purposes of—

(a) facilitating the Director's consideration of a complaint that—

(i) a term in a consumer contract is an unfair term; or

(ii) a term in a standard form contract is a prescribed unfair term; or

(b) ascertaining whether a person has complied with a Tribunal order as to—

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(i) the continued use, or recommendation for use of a term in a consumer contract; or

(ii) the continued use of a prescribed unfair term in a standard form contract.

(2) The Director may, by notice in writing, require any person to supply to the Director—

(a) a copy of the document that is the subject of the complaint or order referred to in subsection (1);

(b) information about the use or recommendation for use by that person of that document in dealings

with consumers.

(3) The notice referred to in sub-section (2) may be varied or revoked by the Director by a subsequent

notice in writing.

(4) A person to whom the notice is addressed must comply with the notice within 14 days of receiving

it.

(5) A person must not, without reasonable excuse, refuse or fail to comply with a requirement of the

Director under this section within the required time.

Penalty: 60 penalty units.

(6) It is a reasonable excuse for a natural person to refuse or fail to give information or do any other

thing that the person is required to do by or under this section, if the giving of the information or the

doing of that other thing would tend to incriminate the person.

(7) Despite sub-section (6), it is not a reasonable excuse for a natural person to refuse or fail to produce

a document that the person is required to produce by or under this section, if the production of the

document would tend to incriminate the person.

32ZC. Declaration by the Tribunal

(1) The Director may apply to the Tribunal for an order declaring that—

(a) a contract is a consumer contract or standard form contract;

(b) a term of a consumer contract is an unfair term;

(c) a term of a standard form contract is a prescribed unfair term.

(2) The Tribunal may make a declaration in relation to a matter under sub-section (1) or any related

matter.

(3) The Tribunal's power to make a declaration under this section is exercisable only by a presidential

member.

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This version of the UK Regulations is taken from the website of Her Majesty’s Stationery Office at

"the Community" means the European Community;

"consumer" means any natural person who, in contracts covered by these Regulations, is

acting for purposes which are outside his trade, business or profession;

"court" in relation to England and Wales and Northern Ireland means a county court or the

High Court, and in relation to Scotland, the Sheriff or the Court of Session;

"Director" means the Director General of Fair Trading;

"EEA Agreement" means the Agreement on the European Economic Area signed at Oporto on

"Member State" means a State which is a contracting party to the EEA Agreement;

"notified" means notified in writing;

"qualifying body" means a person specified in Schedule 1;

"seller or supplier" means any natural or legal person who, in contracts covered by these

Regulations, is acting for purposes relating to his trade, business or profession, whether

publicly owned or privately owned;

"unfair terms" means the contractual terms referred to in regulation 5.

(2) In the application of these Regulations to Scotland for references to an "injunction" or an

"interim injunction" there shall be substituted references to an "interdict" or "interim interdict"

respectively.

4. - (1) These Regulations apply in relation to unfair terms in contracts concluded between a seller

or a supplier and a consumer.

(2) These Regulations do not apply to contractual terms which reflect-

(a) mandatory statutory or regulatory provisions (including such provisions under the law of

any Member State or in Community legislation having effect in the United Kingdom without

further enactment);

(b) the provisions or principles of international conventions to which the Member States or the

Community are party.

5. - (1) A contractual term which has not been individually negotiated shall be regarded as unfair if,

contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and

obligations arising under the contract, to the detriment of the consumer.

(2) A term shall always be regarded as not having been individually negotiated where it has been

drafted in advance and the consumer has therefore not been able to influence the substance of the term.

(3) Notwithstanding that a specific term or certain aspects of it in a contract has been individually

negotiated, these Regulations shall apply to the rest of a contract if an overall assessment of it indicates

that it is a pre-formulated standard contract.

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(4) It shall be for any seller or supplier who claims that a term was individually negotiated to show

that it was.

(5) Schedule 2 to these Regulations contains an indicative and non-exhaustive list of the terms which

may be regarded as unfair.

6. - (1) Without prejudice to regulation 12, the unfairness of a contractual term shall be assessed,

taking into account the nature of the goods or services for which the contract was concluded and by

referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of

the contract and to all the other terms of the contract or of another contract on which it is dependent.

(2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate-

(a) to the definition of the main subject matter of the contract, or

(b) to the adequacy of the price or remuneration, as against the goods or services supplied in

exchange.

7. - (1) A seller or supplier shall ensure that any written term of a contract is expressed in plain,

intelligible language.

(2) If there is doubt about the meaning of a written term, the interpretation which is most favourable

to the consumer shall prevail but this rule shall not apply in proceedings brought under regulation 12.

8. - (1) An unfair term in a contract concluded with a consumer by a seller or supplier shall not be

binding on the consumer.

(2) The contract shall continue to bind the parties if it is capable of continuing in existence without

the unfair term.

9. These Regulations shall apply notwithstanding any contract term which applies or purports to

apply the law of a non-Member State, if the contract has a close connection with the territory of the

Member States.

10. - (1) It shall be the duty of the Director to consider any complaint made to him that any contract

term drawn up for general use is unfair, unless-

(a) the complaint appears to the Director to be frivolous or vexatious; or

(b) a qualifying body has notified the Director that it agrees to consider the complaint.

(2) The Director shall give reasons for his decision to apply or not to apply, as the case may be, for

an injunction under regulation 12 in relation to any complaint which these Regulations require him to

consider.

(3) In deciding whether or not to apply for an injunction in respect of a term which the Director

considers to be unfair, he may, if he considers it appropriate to do so, have regard to any undertakings

given to him by or on behalf of any person as to the continued use of such a term in contracts

concluded with consumers.

11. - (1) If a qualifying body specified in Part One of Schedule 1 notifies the Director that it agrees

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to consider a complaint that any contract term drawn up for general use is unfair, it shall be under a

duty to consider that complaint.

(2) Regulation 10(2) and (3) shall apply to a qualifying body which is under a duty to consider a

complaint as they apply to the Director.

12. - (1) The Director or, subject to paragraph (2), any qualifying body may apply for an injunction

(including an interim injunction) against any person appearing to the Director or that body to be using,

or recommending use of, an unfair term drawn up for general use in contracts concluded with

consumers.

(2) A qualifying body may apply for an injunction only where-

(a) it has notified the Director of its intention to apply at least fourteen days before the date on

which the application is made, beginning with the date on which the notification was given; or

(b) the Director consents to the application being made within a shorter period.

(3) The court on an application under this regulation may grant an injunction on such terms as it

thinks fit.

(4) An injunction may relate not only to use of a particular contract term drawn up for general use

but to any similar term, or a term having like effect, used or recommended for use by any person.

13. - (1) The Director may exercise the power conferred by this regulation for the purpose of-

(a) facilitating his consideration of a complaint that a contract term drawn up for general use is

unfair; or

(b) ascertaining whether a person has complied with an undertaking or court order as to the

continued use, or recommendation for use, of a term in contracts concluded with consumers.

(2) A qualifying body specified in Part One of Schedule 1 may exercise the power conferred by this

regulation for the purpose of-

(a) facilitating its consideration of a complaint that a contract term drawn up for general use is

unfair; or

(b) ascertaining whether a person has complied with-

(i) an undertaking given to it or to the court following an application by that body, or

(ii) a court order made on an application by that body,

as to the continued use, or recommendation for use, of a term in contracts concluded with

consumers.

(3) The Director may require any person to supply to him, and a qualifying body specified in Part

One of Schedule 1 may require any person to supply to it-

(a) a copy of any document which that person has used or recommended for use, at the time

the notice referred to in paragraph (4) below is given, as a pre-formulated standard contract in

dealings with consumers;

(b) information about the use, or recommendation for use, by that person of that document or

any other such document in dealings with consumers.

(4) The power conferred by this regulation is to be exercised by a notice in writing which may-

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(a) specify the way in which and the time within which it is to be complied with; and

(b) be varied or revoked by a subsequent notice.

(5) Nothing in this regulation compels a person to supply any document or information which he

would be entitled to refuse to produce or give in civil proceedings before the court.

(6) If a person makes default in complying with a notice under this regulation, the court may, on the

application of the Director or of the qualifying body, make such order as the court thinks fit for

requiring the default to be made good, and any such order may provide that all the costs or expenses of

and incidental to the application shall be borne by the person in default or by any officers of a company

or other association who are responsible for its default.

14. A qualifying body shall notify the Director-

(a) of any undertaking given to it by or on behalf of any person as to the continued use of a

term which that body considers to be unfair in contracts concluded with consumers;

(b) of the outcome of any application made by it under regulation 12, and of the terms of any

undertaking given to, or order made by, the court;

(c) of the outcome of any application made by it to enforce a previous order of the court.

15. - (1) The Director shall arrange for the publication in such form and manner as he considers

appropriate, of-

(a) details of any undertaking or order notified to him under regulation 14;

(b) details of any undertaking given to him by or on behalf of any person as to the continued

use of a term which the Director considers to be unfair in contracts concluded with consumers;

(c) details of any application made by him under regulation 12, and of the terms of any

undertaking given to, or order made by, the court;

(d) details of any application made by the Director to enforce a previous order of the court.

(2) The Director shall inform any person on request whether a particular term to which these

Regulations apply has been-

(a) the subject of an undertaking given to the Director or notified to him by a qualifying body;

or

(b) the subject of an order of the court made upon application by him or notified to him by a

qualifying body;

and shall give that person details of the undertaking or a copy of the order, as the case may be, together

with a copy of any amendments which the person giving the undertaking has agreed to make to the

term in question.

(3) The Director may arrange for the dissemination in such form and manner as he considers

appropriate of such information and advice concerning the operation of these Regulations as may

appear to him to be expedient to give to the public and to all persons likely to be affected by these

Regulations.

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Regulation 5(5)

INDICATIVE AND NON-EXHAUSTIVE LIST OF TERMS WHICH MAY BE REGARDED AS

UNFAIR

1. Terms which have the object or effect of-

(a) excluding or limiting the legal liability of a seller or supplier in the event of the death of a

consumer or personal injury to the latter resulting from an act or omission of that seller or

supplier;

(b) inappropriately excluding or limiting the legal rights of the consumer vis-à-vis the seller or

supplier or another party in the event of total or partial non-performance or inadequate

performance by the seller or supplier of any of the contractual obligations, including the

option of offsetting a debt owed to the seller or supplier against any claim which the consumer

may have against him;

(c) making an agreement binding on the consumer whereas provision of services by the seller

or supplier is subject to a condition whose realisation depends on his own will alone;

(d) permitting the seller or supplier to retain sums paid by the consumer where the latter

decides not to conclude or perform the contract, without providing for the consumer to receive

compensation of an equivalent amount from the seller or supplier where the latter is the party

cancelling the contract;

(e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high

sum in compensation;

(f) authorising the seller or supplier to dissolve the contract on a discretionary basis where the

same facility is not granted to the consumer, or permitting the seller or supplier to retain the

sums paid for services not yet supplied by him where it is the seller or supplier himself who

dissolves the contract;

(g) enabling the seller or supplier to terminate a contract of indeterminate duration without

reasonable notice except where there are serious grounds for doing so;

(h) automatically extending a contract of fixed duration where the consumer does not indicate

otherwise, when the deadline fixed for the consumer to express his desire not to extend the

contract is unreasonably early;

(i) irrevocably binding the consumer to terms with which he had no real opportunity of

becoming acquainted before the conclusion of the contract;

(j) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid

reason which is specified in the contract;

(k) enabling the seller or supplier to alter unilaterally without a valid reason any

characteristics of the product or service to be provided;

(l) providing for the price of goods to be determined at the time of delivery or allowing a

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seller of goods or supplier of services to increase their price without in both cases giving the

consumer the corresponding right to cancel the contract if the final price is too high in relation

to the price agreed when the contract was concluded;

(m) giving the seller or supplier the right to determine whether the goods or services supplied

are in conformity with the contract, or giving him the exclusive right to interpret any term of

the contract;

(n) limiting the seller's or supplier's obligation to respect commitments undertaken by his

agents or making his commitments subject to compliance with a particular formality;

(o) obliging the consumer to fulfil all his obligations where the seller or supplier does not

perform his;

(p) giving the seller or supplier the possibility of transferring his rights and obligations under

the contract, where this may serve to reduce the guarantees for the consumer, without the

latter's agreement;

(q) excluding or hindering the consumer's right to take legal action or exercise any other legal

remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not

covered by legal provisions, unduly restricting the evidence available to him or imposing on

him a burden of proof which, according to the applicable law, should lie with another party to

the contract.

2. Scope of paragraphs 1(g), (j) and (l)

(a) Paragraph 1(g) is without hindrance to terms by which a supplier of financial services

reserves the right to terminate unilaterally a contract of indeterminate duration without notice

where there is a valid reason, provided that the supplier is required to inform the other

contracting party or parties thereof immediately.

(b) Paragraph 1(j) is without hindrance to terms under which a supplier of financial services

reserves the right to alter the rate of interest payable by the consumer or due to the latter, or

the amount of other charges for financial services without notice where there is a valid reason,

provided that the supplier is required to inform the other contracting party or parties thereof at

the earliest opportunity and that the latter are free to dissolve the contract immediately.

Paragraph 1(j) is also without hindrance to terms under which a seller or supplier reserves

the right to alter unilaterally the conditions of a contract of indeterminate duration, provided

that he is required to inform the consumer with reasonable notice and that the consumer is free

to dissolve the contract.

(c) Paragraphs 1(g), (j) and (l) do not apply to:

- transactions in transferable securities, financial instruments and other products

or services where the price is linked to fluctuations in a stock exchange quotation or

index or a financial market rate that the seller or supplier does not control; -

contracts for the purchase or sale of foreign currency, traveller's cheques or

international money orders denominated in foreign currency;

(d) Paragraph 1(l) is without hindrance to price indexation clauses, where lawful, provided

that the method by which prices vary is explicitly described.

128

APPENDIX H

This Appendix contains statistics from the UK OFT Annual Report 2001 which is subject to

This Appendix contains statistics from the UK OFT Annual

Report 2001 which is subject to Crown Copyright.

129

105

(a) Do you have any comments in relation to these conclusions? Please detail.

Yes No

________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

(b) Do you, or does your organisation, agency or business, have any data or other information which

would indicate the level of concern in relation to unfair contract terms?

Yes No

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Does Australian law, in general, adequately cover the issue of procedural unfairness in contracts?

Why/why not?

Yes No

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Is there a need to regulate contract terms which are unfair in themselves? Why/why not?

Yes No

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

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106

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

What do you perceive the costs/benefits : advantages/disadvantages to be in not regulating further?

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Are guidelines, voluntary codes of conduct or other methods of self regulation by industries an

appropriate way to regulate with respect to unfair contract terms? Why/why not?

Yes No

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Are you aware of any other industry-based initiatives to manage unfair contract terms? If yes, please

provide details.

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

What do you perceive the costs/benefits : advantages/disadvantages to be in self

regulation in relation to unfair contract terms?

___________________________________________________________________________________

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107

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Is it desirable to adapt the UK model to the Australian context? Why/why not?

Yes No

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Do you have any comments on the general definitions?

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

(a) Should private contracts be covered? Why/why not?

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

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108

(b) Should reference be made to standard form contracts used by a particular supplier? Why/why

not?

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(c) Should contracts in relation to interests in land be covered by the legislation? Why/why not?

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

Do you have any comments on the applicability of unfair terms provisions?

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Should the UCCC be covered by general unfair terms legislation? Why/why not?

Yes No

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

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109

Should terms which have been individually negotiated be capable of challenge on the grounds that they

are unfair? Why/why not?

Yes No

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Should the concept of 'drafted in advance' be adopted? Why/why not?

Yes No

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Should the onus of proving that a contract was individually negotiated rest with the trader or the

consumer? Why/why not?

Yes No

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Should a concept of “good faith” be included when determining whether a contractual term is unfair?

Why/why not?

Yes No

___________________________________________________________________________________

___________________________________________________________________________________

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110

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Should a reference to “all the circumstances” of the contract be included when determining whether a

contractual term is unfair? Why/why not?

Yes No

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Should the courts be mandated or enabled to take the matters listed in the Victorian provision into

account? Please give reasons.

Mandated Enabled

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Do you have a preference for the style of list in the Victorian provision or in the Schedule to the UK

Regulations? Please give reasons.

Victorian Provisions UK Regulations

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

(a) Should adequacy of price and/or the main subject matter be included in or excluded from

coverage of unfair terms regulation? Please give reasons.

135

111

Included Excluded

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(b) If they should be excluded what limits, if any, should be placed on that exclusion?

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(a) Is the Victorian version of the UK model preferable in this respect (description of unfair

terms)? Please give reasons.

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(b) Would you recommend any further changes?

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

Are there other matters which should be included in the list in section 32X? If yes, please detail.

Yes No

136

112

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

(a) Do you support the use of criminal sanctions where a term has been prescribed by regulation?

Why/why not?

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(b) What other mechanism could be used to ensure that the legislation is taken seriously?

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

Should there be a power for a court/tribunal to vary a term or only declare it void? Please give reasons.

Vary only Void

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

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113

Should there be other remedies available, such as compensation, restitution, damages? Why/why not?

If yes, please detail.

Yes No

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

What other sanctions would be appropriate in order to make regulation of unfair terms effective?

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

(a) Should a term be assessed as unfair because of lack of legibility, clarity, intelligibility, etc?

Why/why not?

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(b) Should there be more detail around what is required (with respect to plain and intelligible

language)? If yes, please detail.

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

138

114

___________________________________________________________________________

___________________________________________________________________________

Should the contra proferentem rule be set out in the provisions for the purpose of drawing the attention

of suppliers and purchasers to its existence?

Yes No

(a) Should other bodies be able to apply for injunctions? Why/why not?

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(b) Should this include designated consumer bodies? Why/why not?

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(a) Is the cost to government in implementing regulation of unfair terms under this model

justified? Why/why not?

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

139

115

(b) Are there other costs/benefits : advantages/disadvantages to government under this model?

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

Under such a model, should the relevant fair trading agencies be empowered or mandated to investigate

complaints in relation to unfair terms? Why/Why not?

Yes No

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

(a) What are the costs to business under this model of regulation and are these costs justified?

Why/why not?

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(b) Are there other costs/benefits : advantages/disadvantages to business under this model?

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

140

116

(a) Are the benefits to consumers under this model sufficient to justify its adoption? Why/why

not?

Yes No

__________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(b) Are there other costs/benefits, advantages/disadvantages to consumers under this model?

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(a) Is the CRA a suitable model for a nationally consistent regulatory regime for unfair contract

terms? Why/why not?

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(b) Would the CRA model benefit from amendment in any way? Please give reasons and if yes,

detail amendments.

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

141

117

What do you consider the costs/benefits : advantages/disadvantages to be in the CRA model?

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Is the ‘Composite Model’ a suitable model for a nationally consistent regulatory regime for unfair

contract terms? Why/why not?

Yes No

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

Are there costs/benefits : advantages/disadvantages in relation to the composite model in addition to

those raised in options 3 and 4?

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

(a) Which of the five options listed do you consider is the most appropriate way to proceed?

Please give reasons.

1 2 3 4 5

___________________________________________________________________________

___________________________________________________________________________

142

118

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(b) Are there any other options you believe should be considered? Please detail.

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

If the decision was for government regulation, should nationally consistent legislation for unfair

contract terms be uniform or harmonised? Please give reasons.

Uniform Harmonised

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

(a) In principle, should any unfair terms legislation apply to B2B contracts as well as consumer

contracts? Why/why not?

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

143

119

(b) Should any such legislation apply to all B2B contracts or just those involving small business –

and how would ‘small business’ be defined?

All B2B Small business only

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(c) If B2B contracts were to be included, should the legislation apply to individually negotiated

contracts/terms or only standard form contracts/terms? Please give reasons.

Individually negotiated Standard form only

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(d) If B2B contracts were covered should the remedies be the same as for consumers. Why/why

not?

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(e) What, if any, enforcement role and functions should fair trading agencies have if B2B

contracts were covered?

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

144

120

___________________________________________________________________________

___________________________________________________________________________

(f) Would extending the unfair provisions to B2B contracts simply duplicate existing protections

e.g. unconscionable conduct, commercial tenancy legislation etc? Please detail.

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(g) What types of contract might be excluded from coverage? (For example: insurance contracts,

telecommunications contracts, contracts for the transfer of land, securities, copyright)?

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(h) (i) Should adequacy of price be excluded for any B2B regulation? Why/why not?

Yes No

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

(ii) Are there other matters which should be excluded? Please detail.

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

145

121

(i) Should unfair terms be prescribed in any regime to regulate for B2B contracts if there is an

ability to prescribe for consumer contracts? Why/why not?

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(j) Should the onus of proof for B2B contracts be on the business disputing the fairness of the

term? Please give reasons.

Yes No

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(k) How might section 51AC TPA be affected by the composite model?

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

(l) What do you consider the costs/benefits : advantages/disadvantages to be in regulating unfair

contract terms in relation to B2B?

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

146

122

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

147