The Australian Competition and Consumer Commission (ACCC) has issued its first case based exclusively on the 'unfair contract terms' provisions of the Australian Consumer Law.

This case comes after an extensive review by the ACCC into consumer contracts. It signals an intention by the ACCC to proactively pursue breaches of the 'unfair contract terms' provisions.

These provisions came into force in 2010 and have the potential to be wide reaching.

The provisions relate to consumer contracts which are essentially non-negotiable. Examples include contracts for airline tickets and for mobile phone services. 

If terms in these standard form consumer contracts are 'unfair', they can be deemed void and unenforceable.

A term will be 'unfair' in such a contract if:

  • it would cause a significant imbalance in the parties’ rights and obligations under the contract; and

  • 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 (whether financial or otherwise) to a party to the contract if it were to be applied or relied upon.

This is the first case where the ACCC has issued a case solely to pursue a breach of, and test, those provisions.

The case has been brought against ByteCard (Netspeed Internet Communications) which is an Internet Service Provider.

The ACCC has alleged that ByteCard's terms are 'unfair' as they:

  • enable ByteCard to unilaterally vary the price under an existing contract without providing the customer with a right to terminate the contract;

  • require the consumer to indemnify ByteCard in any circumstance, even where the contract has not been breached, and the liability, loss or damage may have been caused by ByteCard's breach of the contract;

  • enable ByteCard to unilaterally terminate the contract at any time with or without cause or reason; and 

  • are not reasonably necessary to protect ByteCard’s legitimate business interests.

 The case is listed for a scheduling conference on 13 June 2013.

Action

  • Businesses should check whether they provide consumer contracts that are subject to the 'unfair contract terms' provisions.

  • If so, they should ensure those contracts do not contain 'unfair' terms.

  • Seek legal advice if unsure.