The unfair contract terms provisions of the Australian Consumer Law are important for business to keep in mind. When a court assesses if a term is ‘unfair’ it must take into account whether the term is ‘transparent’. A recent decision about the lay-by of Christmas hampers provides timely lessons about business and marketing practices that reduce transparency. The consequence could be that your contract term is rendered void.
Chrisco is a well-known supplier of Christmas hampers. When it included a term in its lay‑by contracts to allow it to continue withdrawing funds from customers’ bank accounts even after they had paid for their Christmas hampers, the ACCC decided to take action.
The ACCC successfully argued the term was unfair, rending the term void. This was despite the contract including an ‘opt-out’ option for consumers directly opposite the unfair term.
In determining whether a term in a consumer contract is unfair, the court can consider any matters it thinks relevant. But one matter it must take into account is the extent to which the term is ‘transparent’. Thus it’s important for businesses to understand what it means for a term to be ‘transparent’.
WHEN IS A TERM TRANSPARENT?
The Australian Consumer Law states that a term is transparent if it is:
- expressed in reasonably plain language;
- presented clearly; and
- readily available to any party affected by the term.
The unfair term in the Chrisco contracts had several characteristics which reduced transparency.
WHAT FACTORS REDUCED THE TRANSPARENCY OF THE CHRISCO TERM?
Firstly, the language of the unfair term was so brief and casual in nature that it raised more questions for consumers than it answered.
It was not possible for consumers to determine the amount that would automatically be deducted from their account if they failed to opt out, and it was unclear as to whether the consumer could cancel the automatic payments.
Secondly, the font size, colour and marketing devices used to set out the contract terms in the Chrisco catalogue impacted on the criteria of legibility, clear presentation and whether the term was readily available to the consumers reading the contract.
For example, the font size used was less than half the size of main headings. Some aspects of the contract were highlighted in a different colour, in italics or bold font as well as within highlight boxes, which helped draw attention to them.
In contrast, the unfair term was set out in a densely packed page of small print terms.
LESSONS ON TRANSPARENCY
The Chrisco decision highlights why transparency is important when drafting contracts that are subject to the unfair contract terms provisions.
Terms which are overly broad, ambiguous or lacking in key information may not be expressed in reasonably plain language. The criteria as to plain language requires consideration not only of the language used but also whether the term and its effect can be understood in the context of the contract as a whole.
Does the term raise any questions? Can those questions be answered by the party affected by it?
Even terms drafted in plain language can cease to be transparent if they are affected by ‘formatting’ or the way the contract terms are presented.
The order and visual impact of a contractual document is important. It can materially reduce the significance of particular terms while drawing attention to others. Marketing techniques such as font size, font type and colour can all have an impact on transparency.
A proper assessment of transparency does not end once contractual terms are ‘sent to marketing’. A proper assessment of transparency should be conducted on the final product.