Unfair Contract Terms Update

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					Unfair Contract Terms Update
Dr Elizabeth Lanyon
Associate Professor in Law
Monash University
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
  by law
           Assessment of term

• Part contains inclusive list of factors
  such as
   –   Avoidance or limitation of performance
   –   Penalties on breach or termination
   –   Unilateral variation
   –   Assignment

• Consumer can always take own action
• Consumer Affairs
  – Education and information
  – Prescription of term (followed by penalties
    for use)
  – Declaration from court or tribunal
  – Injunction
  – Enforceable undertaking
  – Public naming
           The context

• 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.
           Tailoring strategies

•   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
           Mobile Phones
• 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
  Affairs Victoria
• August 2004 Director writes to each company detailing
  concerns with terms and seeking co-operation; almost all
  respond positively.
• On going discussions with suppliers about proposed
  revisions; Telstra announces intent to replace contracts
  (February 2005)
• 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).
          Fitness Centres

• 2004 Director writes to national fitness centre
  (Fernwood) identifying serious concerns with
  standard terms
• 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
  local business
• 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
  released today.
          Other projects

• 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
           Typical issues

• Completely one sided contracts where all
  supplier’s obligations depend on implied
  statutory warranties.
• 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
             past year
• 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
      compliance action
    – 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
   assists staff.
           Future directions

• Priorities for 2005/6:
   –   Building contracts
   –   Pay TV
   –   Internet service providers
   –   Home removalists.