ByteCard (otherwise known as NetSpeed Internet Communications) has ended up consenting to declarations in the Federal Court that certain provisions of its standard form consumer contracts are void under the provisions of the Australian Consumer Law. Each of the terms were declared unfair because they created a significant imbalance in the rights and obligations of the parties, were not necessary to protect the legitimate interests of the party benefitting from the terms and would cause financial detriment to the consumer, if relied upon.
What NOT to do
The offending terms were as follows:
Section 1.7 - NetSpeed reserves the right to change prices or services at any time without prior notice to customers or the public, except when the service is an Australian Broadband Guarantee Service. Price changes will not be retroactive for existing prepaid customers. It is the User’s responsibility to check this online.
This term was declared to be unfair as it entitled ByteCard to unilaterally vary the amount payable by the customer under the contract without any prior notice, any opportunity to negotiate or a right to terminate (for those customers whose contracts had not expired, and where other limited termination rights did not apply).
Section 4.1 – The User agrees to indemnify and hold NetSpeed, its affiliates, its licensers, its contractors or their respective employees harmless against any and all liability, loss claim, judgment or damage. This indemnity includes, but is not limited to an indemnity against all actions, claims and demands (including the cost of defending or settling any actions, claims or demands) which may be instituted against us, as well as all expenses, penalties or fines (including those imposed by any regulatory body or under statute).
Section 4.2 – The User agrees to indemnify NetSpeed for any expenses including, but not limited to:
- attorney’s fees and cost of litigation
- its licensers
- its contractors or their respective employees as the result of any and all of User’s account whether authorised or not authorised or as a result of the negligence, wilful misconduct or breach of any terms of this Agreement by User, (including but not limited to claims, liabilities, losses, damages, judgments and costs)
- disruption to User’s telephone services during installation of an ADSL Service.
Clauses 4.1 and 4.2 were declared unfair because they required the consumer to indemnify and hold harmless ByteCard in any circumstances, including where there had been no breach of contract, negligence or other wrongful act by the consumer, and where the liability or loss covered might have been caused or contributed to by ByteCard. They were also considered unfair because there was no corresponding term obliging ByteCard to indemnify its customers.
Section 6.5 – With the exception of obligations under the Broadband Guarantee Program, NetSpeed reserves the right to terminate any account at any time with or without cause or reason. In the event that NetSpeed would choose to take this action the User understands and agrees that the Users (sic) only compensation would be a prorated refund for the current period that User has already paid.
This was declared unfair as ByteCard could terminate at any time without cause or reason and without giving compensation (save for the prorated refund if prepaid), whereas the consumer’s right to terminate in the contract was conditional on written notice being received, accounts being paid in full, in certain cases, the payment of a cancellation fee, and in certain cases, the payment of a minimum contract period.
You have been warned!
Although the decision amounted to consent orders, it is the ACCC’s first, and first successful, case relating to unfair contract terms and it serves as a warning to review all standard form consumer contracts for possible unfair terms. The ACCC is making this a priority area and is showing that it has a bite as bad as its bark on such terms. Businesses should take note of this decision and seek advice should they have the similar terms and conditions incorporated into their consumer contracts.