Unfair contract terms

In the course of investigating complaints, the TIO may come across contractual terms which have the potential to be unfair. There are legal principles which may prevent a party relying on the terms of a contract in certain circumstances (for example the law relating to unconscionable conduct).

The Trade Practices Amendment (Australian Consumer Law) Act (No.1) 2010 contains provisions that address the use of unfair contract terms in consumer contracts. A term in a consumer contract is unfair if it would cause a significant imbalance in the parties’ rights and obligations arising under the contract, it is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term and it would cause detriment (financial or otherwise) to a party if it were to be applied or relied on.

Both Part 2B of the Fair Trading Act (Victoria) and the Telecommunications Consumer Protections (TCP) Code identify and prohibit the use of unfair contract terms. Both define an unfair contract term as a term which, contrary to the requirements of good faith and in all the circumstances, causes a significant imbalance in the parties' rights and obligations arising under the contract to the detriment of the consumer.

In dealing with complaints about unfair contract terms, the TIO will first of all have regard to the object and scope of the term(s) in question. The TIO will then have regard to the Trade Practices Amendment (Australian Consumer Law) Act (No.1) 2010, the Fair Trading Act (Victoria) in cases where it is applicable and the TCP Code. In forming a view on whether a particular term is unfair the TIO will have regard to all relevant circumstances.

References:

• Trade Practices Amendment (Australian Consumer Law) Act (No.1) 2010
• Telecommunications Consumer Protections Code - Chapter 5, Consumer Contracts (PDF 352kb)
• Part 2B of the Fair Trading Act (Victoria)

Updated on: 6 July, 2010

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