The Federal Court has ruled in Australian Competition and Consumer Commission v Chrisco Hampers Australia Limited [2015] FCA 1204 that Chrisco's lay-by contracts for its Christmas hampers contained terms that contravened the provisions of the Australian Consumer Law (ACL).


Chrisco Hampers Australia Limited (Chrisco) breached the provisions of the ACL in the following ways:

  1. The Headstart term in Chrisco's lay-by contracts was an unfair contract term.
  2. Chrisco made misleading and false representations to its customers about their ability to cancel their lay-by contracts before the goods were delivered to them.

The matter will now be set down for a penalty hearing.


  1. It is against the law to tell your customers that they cannot cancel a lay-by contract at any time before the goods are delivered to them.
  2. Only include those terms and conditions in your consumer contracts that are reasonably necessary to protect your legitimate business interests.
  3. Keep your consumer contracts fair for your business and your customers.
  4. Ultimately, the fairness or unfairness of a term requires a case by case assessment in the context of the entire contract.


Chrisco supplies Christmas hampers to customers across Australia. Nearly all of Crisco's sales were paid for by its customers in three or more instalments. Chrisco's contracts included a 'Headstart term' which authorised Chrisco to continue withdrawing funds from a customer's bank account even after the customer had paid for the goods in full. The Headstart term continued to apply unless the customer opted out of it.

The Headstart term operated like an interest-free savings program in that after the goods had been paid for, Chrisco could continue withdrawing funds from a customer's bank account so that the customer could allocate this credit towards prospective purchases. If the customer never placed another order and instead requested a refund, the money would be refunded to the customer without interest. According to Chrisco, this arrangement conferred a benefit on customers because they were able to "keep saving" for prospective orders over a longer period of time and pay for them through smaller instalments.


The Australian Competition and Consumer Commission (ACCC) alleged that the Headstart term was an 'unfair term' within the meaning of section 24 of the ACL, which deems a contractual term to be unfair if:

  1. it would cause a significant imbalance in the parties' rights and obligations arising under the contract; and
  2. it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
  3. it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

The ACL stipulates that a term is transparent if it is expressed in reasonably plain language, is legible, is presented clearly and is readily available to any party affected by the term.

In determining whether the Headstart term was unfair, the Court discussed each of the above elements in turn, taking into account the extent of the term's transparency and the contract as a whole. The Court reasoned that:

  1. The Headstart term gave Chrisco a right to continue withdrawing funds from the customer's bank account even after full payment of an order, without imposing a correlative duty on Chrisco.
  2. Although the Headstart term was in a noticeable position in the Chrisco order forms, catalogues and website, the term was printed in a small font and drafted in a way that reduced its transparency. This was because the term did not clearly identify the amount of money that would be debited from the customer's bank account or how the amounts would be determined. Further, it did not explain how the customer could cancel the direct debit payments and obtain a refund.
  3. Therefore, the Headstart term caused a significant imbalance in the parties' rights and obligations under the contract.
  4. Chrisco's customers lost the benefit of interest which would have accrued if the money had been invested in an interest bearing account rather than being withdrawn by Chrisco.
  5. The customers did not receive any corresponding benefit in lieu of interest, for example, they did not receive any discount for making a purchase.
  6. Therefore, the Headstart term imposed a significant financial detriment upon Chrisco's customers.


The ACCC alleged that Chrisco had breached subsection 29(1)(m) of the ACL, which states:

A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services ... make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy ...

Related to the above allegation was section 97(1) of the ACL, which states:

A consumer who is party to a lay-by agreement may terminate the agreement at any time before the goods to which the agreement relates are delivered to the consumer under the agreement.

The Court held that Chrisco had contravened the above provisions because its website terms and conditions and order confirmations represented to its customers that their orders could not be cancelled if they had paid for the goods in full even though the goods had not been delivered. As the Court was satisfied that the agreements between Chrisco and its customers were lay-by agreements, these representations directly contravened the right of consumers to terminate a lay-by agreement at any time before the delivery of the goods.