LAW2101 Lecture Notes - Lecture 13: Australian Consumer Law, Bmw M54, Alarm Device
LAW2101'CONTRACT'A'-'CASE'SUMMARIES'AND'KEY'POINTS'
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TOPIC'13:'CONSUMER'CONTRACTS'AND'SMALL'BUSINESS'CONTRACTS'
*Note:'Each'Part'has'a'different'concept'of'“consumer”!''Although'there'is'substantial'overlap,'the'two'
regimes'apply'to'different'categories'of'contract.'''
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UNFAIR'CONTRACT'TERMS'
Invalidates'unfair'contract'terms'in'standard'form'consumer'contracts'and'small'business'contracts.''
Provisions'are'generally'raised'as'a'defence'to'an'action'for'breach'of'contract.'
*Note:'ACL'has'been'amended'(effective'12'November'2016)'to'extend'the'unfair'contract'term'provisions'
to'cover'low-value'small'business'standard'form'contracts,'as'they'are'vulnerable'against'larger'businesses'
Part'2-3'
Statute'
Interpretation'
ACL:'Unfair'terms'of'consumer'contracts'(are'
void)'Section'23'
(1) makes'a'contract'term'void:''
• If'it'is'in'a'“consumer'contract”'or'“small'
business'contract”'
o s23(3)'“Consumer'contract”:'supply'to'
an'individual'for'PDHUC'purpose'
o s23(4)'“Small'business'contract”:'Head'
count'(number)'of'employees'and'price'
criteria'
• in'a'“standard'form'contract”'(s27)'
• and'it'is'“unfair”'(ss24,'25)'
o 3-Part'Test'(s'24):'Significant'imbalance,'
not'necessary'to'protect'legitimate'
interests,'would'cause'detriment'(Refer'
to's25'for'examples)'
• Exclusions/unless:'
o Core'term'of'the'bargain'(s26'–'upfront'
price,'subject'matter,'parties)'
o Or,'type'of'contract'excluded'from'the'
UCT'regime'(s28'–'carriage'of'goods'by'
ship,'etc.)'
• Remedies'available'under'Part'5-4'
(3) A'consumer'contract'is'a'contract'for:'
(a) a'supply'of'goods'or'services;'or'
(b) a'sale'or'grant'of'an'interest'in'land;'
to'an'individual'whose'acquisition'of'the'goods,'
services'or'interest'is'wholly'or'predominantly'
for'personal,'domestic'or'household'use'or'
consumption”'(PDHUC)'
(4) A'contract'is'a'small'business'contract'if:'
(a) the'contract'is'for'a'supply'of'goods'or'
services,'or'a'sale'or'grant'of'an'interest'in'
land;'and'
(b) at'the'time'the'contract'is'entered'into,'at'
least'one'party'to'the'contract'is'a'business'
that'employs'fewer'than'20'persons;'and'
(c) either'of'the'following'applies:'
(i) the'upfront'price'payable'under'the'
contract'does'not'exceed'$300,000;'
Ø PDHUC'purpose:'
v Focus'on'individual’s'purpose'of'acquisition'
(i.e.'actual'purpose'of'individual'is'what'
matters,'not'what'most'other'people'would'
acquire'the'good/service'for)'
v Will'exclude'any'supplies'to'a'business'for'
business'purposes'(separate'test'for'small'
business).'
v Definition'does'not'limit'scope'of'Part'2-3'to'
things'ordinarily'of'a'PDH'nature'(e.g.'
purchase'of'commercial'espresso'machine'
for'use'in'private'home'would'qualify'even'
though'such'a'machine'would'ordinarily'be'
seen'in'a'café)'
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LAW2101'CONTRACT'A'-'CASE'SUMMARIES'AND'KEY'POINTS'
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(ii) the'contract'has'a'duration'of'more'than'
12'months'and'the'upfront'price'payable'
under'the'contract'does'not'exceed'
$1,000,000.'
ACL:'Meaning'of'unfair'Section'24'
(3) A'term'of'a'consumer'contract'is'unfair'if:'
(a) it'would'cause'a'significant'imbalance'in'the'
parties’'rights'and'obligations'arising'under'
the'contract;'and'
(b) it'is'not'reasonably'necessary'in'order'to'
protect'the'legitimate'interests'of'the'party'
who'would'be'advantaged'by'the'term;'and'
(c) it'would'cause'detriment'(whether'financial'
or'otherwise)'to'a'party'if'it'were'to'be'
applied'or'relied'on.'
(2) In'determining'whether'a'term'of'a'consumer'
contract'is'unfair'under'subsection'(1),'a'court'
may'take'into'account'such'matters'as'it'thinks'
relevant,'but'must'take'into'account'the'
following:'
(a) the'extent'to'which'the'term'is'transparent;'
(b) the'contract'as'a'whole.'
(3) A'term'is'transparent'if'the'term'is:'
(a) expressed'in'reasonably'plain'language;'and'
(b) legible;'and'
(c) presented'clearly;'and'
(d) readily'available'to'any'party'affected'by'
the'term.'
Ø 3'Key'Elements:'
1. Significant'imbalance'
v Term'would'cause'significant'imbalance'
in'parties’'rights'and'obligations'under'
the'contract'
v Parties’'situation'would'be'grossly'
unequal'
v Onus'of'proof'on'party'who'seeks'to'
invalidate'term''
2. Not'reasonably'necessary'to'protect'
legitimate'interests'
v Term'not'reasonably'necessary'in'order'
to'protect'the'legitimate'interests'of'the'
advantaged'party'
v Interests'must'be'sufficiently'compelling'
to'overcome'detriment'caused'to'other'
party'
v Deemed'not'reasonably'necessary'unless'
proven'otherwise'(24(4))''
3. Would'cause'detriment'
v Term'would'cause'detriment'to'a'party'
v Detriment'need'not'be'financial'
v Onus'of'proof'on'party'who'seeks'to'
invalidate'term''
*Note:'MUST'take'into'account'transparency'and'
contract'as'a'whole'(i.e.'transparency'indicates'
significant'imbalance'in'parties'rights)'
'ACL:'Examples'of'unfair'terms'Section'25'''
'(1)'lists'terms'that'may'be'unfair:'
• a'term'that'permits'one'party'but'not'the'other'
to'terminate'a'contract;'
• a'term'that'penalises'one'party'for'breach'or'
termination'(e.g.'excessive'exit'fee'for'early'gym'
membership'termination)'
• a'term'that'limit’s'one'party’s'right'to'sue'the'
other'(e.g.'exclusion'of'liability'clauses)'
(1)(a),'(i)'&'(k)'exclude'or'limit'liability:'
• Avoid'or'limit'performance'of'the'contract'
• Limit'vicarious'liability'for'its'agents'
• Limit'right'to'sue'another'party'
*Note:'Such'terms'may'create'significant'imbalance,'
but'limitation'may'not'be'unfair'(i.e.'some'statutes'
expressly'permit'limitation'(e.g.'cannot'modify'
consumer'guarantee'-'64A'ACL))'
'(1)(b),'(d),'(e),'(f),'(g),'(h)'&'(j)'allow'contractual'
unilateral'changes'to:'
• terminate'the'contract'
Ø Purpose'of'listing'is'to'provide'guidance:'
v list'is'not'exhaustive'
v terms'not'listed'can'be'held'to'be'unfair'
v regulations'may'prescribe'further'terms'
Ø Terms'listed'in's25'are'not'prohibited'per'se'(i.e.'
whether'a'listed'term'is'unfair'is'to'be'assessed'
according'to'the'test'in's24)'
Ø Watch'out'for'broad'clauses'
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LAW2101'CONTRACT'A'-'CASE'SUMMARIES'AND'KEY'POINTS'
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• vary'the'terms'of'the'contract'
• renew'or'not'renew'the'contract'
• vary'the'upfront'price'payable'without'the'right'
of'another'party'to'terminate'
• vary'the'characteristics'of'the'goods'/'services'
• unilaterally'determine'whether'contract'has'
been'breached'or'to'interpret'its'meaning'
• assign'the'contract'
*Note:'Such'power'can'be'easily'abused,'but'
unilateral'change'is'appropriate'in'certain'situations'
(e.g.'variation'of'interest'rate)'
(1)(c)'deals'with'penalty'clauses'(e.g.'£5'a'day'late'
fee'in'Interfoto'v'Stiletto):'
• depends'on'whether'the'penalty'is'
proportionate'to'loss'occasioned'by'the'breach'
• genuine,'reasonable'pre-estimate'of'loss'is'not'a'
penalty'
(1)(h),'(l)'&'(m)'create'disadvantage'in'litigation:'
Party'is'not'able'to'use'all'evidence,'or'onus'of'proof'
is'shifted'
• Limits'evidence'can'adduce'in'legal'proceedings'
(e.g.'entire'agreement'clause)'
• Imposes'evidential'burden'in'legal'proceedings'
(1)(n)'Minister'may'prescribe'terms'by'regulation'in'
respect'to'disadvantage'in'litigation'
• before'doing'so'Minister'must'consider'(per'
s25(2)):'
o detriment'of'term'to'consumers'
o impact'of'prescription'on'business'
o public'interest'
ACL:'Terms'that'define'main'subject'matter'of'
consumer'contract'etc.'are'unaffected'Section'26''
(1) Section'23'does'not'apply'to'a'term'of'a'
consumer'contract''or'a'small'business'contract'
to'the'extent,'but'only'to'the'extent,'that'the'
term:'
(a) defines'the'main'subject'matter'of'the'
contract;'or'
(b) sets'the'upfront'price'payable'under'the'
contract;'or'
(c) '....'
(2) The'upfront'price'payable'under'a'contract'is'the'
consideration'that:'
(a) is'provided,'or'is'to'be'provided,'for'the'
supply,'sale'or'grant'under'the'contract;'and'
(b) is'disclosed'at'or'before'the'time'the'
contract'is'entered'into;''
but'does'not'include'any'other'consideration'
that'is'contingent'on'the'occurrence'or'non-
occurrence'of'a'particular'event.'
Ø Not'subject'to'exceptions'
v Core'term'of'the'bargain:'Upfront'price,'
subject'matter,'parties'
ACL:'Standard'form'contracts'Section'27'
Ø Onus'of'proof:'Onus'is'on'the'denying'party.'If'
