Understanding Unfair Contract Terms
The Australian Consumer Law (ACL) is designed to shield consumers from unfair business practices frequently employed as selling strategies. Under Part 2-3 of the ACL, if a consumer or small business contract encompasses unfair terms, or if it takes the form of a standard contract, it may be deemed void. To fully grasp your entitlements under this section, it is crucial to define the associated terms.
Defining Consumer Contracts
A 'consumer contract' refers to a contract for the provision of goods or services to an individual primarily for personal, domestic, or household consumption. Defining what qualifies as goods typically used for domestic or household purposes can pose challenges. However, the Court has embraced a broad definition, ranging from foil products for commercial use to commercial cars designed for domestic use. Evaluating the initial intention of the product's usage can often help determine its fit under this category.
Understanding Small Business Contracts
A 'small business contract' mandates that at least one party to the contract employs fewer than 20 individuals. The upfront price should not exceed $300,000, or, if the contract spans more than 12 months, the upfront price must be less than $1,000,000.
For a term in either of these contracts to be judged unfair, it must significantly imbalance the rights and obligations of the parties, not protect any legitimate interest, and could cause detriment to a party if relied upon.
Standard Form Contracts: A Potential Pitfall
Standard form contracts are commonplace in business dealings and typically offer a predetermined set of terms to each client. These contracts often vest all bargaining power in one party, presenting the other party with a 'take it or leave it' situation, devoid of an effective opportunity to negotiate the terms. When a contract isn't tailored to the consumer's specific needs, there's an increased risk of unfair contract terms arising, given the minimal scope for negotiation.
Seeking Redress and Mitigating Risk
If you've been subjected to a standard form contract or suspect that a term in your contract is unfair, you may be entitled to sever this term or nullify the entire contract. If the business has exploited this unfair term to its advantage, causing you detriment, you might also be eligible for financial compensation.
Conversely, for businesses drafting contracts, cognizance of these limitations and the associated risks of issuing a standard form contract is essential. It's vital to note that if a term in a standard form contract is deemed unfair and void in one instance, it could be invalidated in all standard form contracts executed by the business.
At Arida Lawyers, our team of legal experts is poised to help you navigate the complexities surrounding consumer contracts, offering advice and assistance in drafting contracts compliant with these stipulations. Whether you're looking to minimise your liability exposure to unfair contract terms, or are seeking to render an unfair term void while compensating for any resultant losses, we are here to support you. For guidance on your next steps, don't hesitate to contact us at 1300 146 390 for your initial consultation or email us your inquiry at info@aridalawyers.com.
This article provides general information relevant to our expert services. It is not legal advice and should not be relied upon as such. If you are seeking legal advice, you should contact us for a free initial consultation.
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