Unfair Contract Terms Update
Dr Elizabeth Lanyon
Associate Professor in Law
Senior Policy Adviser
Consumer Affairs Victoria
What is an unfair
• Contrary to requirements of good faith
and in all the circumstances, causes a
significant imbalance in the rights and
obligations arising under the contract
to the detriment of the consumer
• Unless expressly permitted or required
Assessment of term
• Part contains inclusive list of factors
– Avoidance or limitation of performance
– Penalties on breach or termination
– Unilateral variation
• Consumer can always take own action
• Consumer Affairs
– Education and information
– Prescription of term (followed by penalties
– Declaration from court or tribunal
– Enforceable undertaking
– Public naming
• Regulations in UK for over ten years
• Part 2B commences 9 October 2003
• National Working Party on unfair contract
terms jointly chaired by Victoria
– Discussion Paper January 2004
– Ministerial Council Communique April 2005
– Other national working parties eg hire cars: unfair
terms only one type of regulatory response; may
pre empt more prescriptive treatment.
• Size and number of suppliers
– Can individual assessments be made?
– Commitment to compliance
– Court action to settle issues/enforce
– Sectoral guidelines
• Range of problems
• Suitability of remedy
• Use of Part to address unfair practices
• Close liaison with other regulators to ensure
The experience so
• November 2003 Director issues guidelines
• Announces priorities including:
– Mobile phones
– Hire cars
– Fitness centres
– Priorities reflect complaint history, prevalence of
similar standard terms throughout industry, major
suppliers with large market shares.
• Strategy is to review contract terms and seek co-
operation of suppliers before proceeding to
• April 2004 Director writes to Telstra, Optus, Virgin,
Hutchison and AAPT seeking copies
• Commissioning of research from Communications Law
Centre and completion of detailed analysis by Consumer
• August 2004 Director writes to each company detailing
concerns with terms and seeking co-operation; almost all
• On going discussions with suppliers about proposed
revisions; Telstra announces intent to replace contracts
• Influence on timing and content of ACIF Consumer
Contracts Code registered by ACA.
• Commencement of action against AAPT in Victorian Civil
and Administrative Appeals Tribunal (on going).
• 2004 Director writes to national fitness centre
(Fernwood) identifying serious concerns with
• 2004-5 face to face meetings and
correspondence relating to proposed
• April 2005 centre advises contract terms and
accompanying documentation, with roll out
from late May 2005.
• April 2005 ongoing Consumer Affairs Victoria
and centre address remaining concerns
related to waiver of liability and right of
Hire Car Contracts
• Industry segmented into national suppliers and small
• March 2004 Director writes to all suppliers advising
of Part 2B and requesting copies of contracts.
• December 2004, Director writes to each of
Avis/Budget, Thrifty, Hertz, Europcar and
Maui/Britz/Backpacker detailing concerns with
• Maui/Britz/Backpacker bring in revised terms April
2005; Hertz: complete revision with roll out
anticipated for mid year. On going progress with
other suppliers;extension to others with market
• Guidelines on vehicle hire contracts for all suppliers
• Liaison with VACC in relation to new and
used car contracts.
• Liaison with REIV in relation to residential
tenancies terms; research commissioned
from Tenants Union re additional terms.
• Finalisation of internal analysis of domestic
building and renovation contracts.
• Ad hoc consideration of retirement village
contracts, car auction contracts and contracts
of individual suppliers involved in consumer
• Completely one sided contracts where all
supplier’s obligations depend on implied
• Unilateral variation
• Failure to itemise all costs and penalties on
• Termination for “any” breach
• Purported exclusion of all liability for loss.
• Debiting arrangements.
Lessons from the
• Senior management need to be involved to ensure
timely and appropriate response to Consumer Affairs
Victoria’s concerns and monitor progress closely
– Inappropriate delegation may cause escalation in
– Senior management likely to be more experienced with
contract negotiation to achieve balance of rights and
obligations and understand allocation of risk issues.
• Involve in house counsel or external lawyers in review of
– Part 2B focuses on construction of clause not on
practice or on usual implementation of term. Liability
issues may require legal advice.
View review of terms as a positive opportunity to improve
competitive edge, improve consumer satisfaction and
reduce complaints. A simpler and clearer contract also
• Priorities for 2005/6:
– Building contracts
– Pay TV
– Internet service providers
– Home removalists.