The Competition and Consumer Act makes “unfair” contract terms void. If a clause is void it cannot be enforced.
Business people should review their standard form contracts regularly to ensure that they are fair.
Consumers should be aware that they may not be bound by the terms of any contract that they have entered into if those terms are not fair.
In order for the act to make an unfair contract term void, the contract must be a consumer contract and the contract must be in standard form.
A consumer contract is a contract for the supply, to an individual of goods or services or land for reasons of personal, household or domestic use or consumption.
It is hard to be sure what a standard form contract is. It is likely however that any contract which is based on a document prepared in advance of any negotiations, that is little changed as a result of negotiations or the considerations of the particular circumstances are likely to be standard form contracts.
A contract that is prepared specifically for a particular transaction and which did not use some form of agreement that was prepared on some earlier occasion will not be a standard form contract.
It is easy to imagine that the “click to accept” contracts that are often seen when transacting on the internet will be judged to be standard form contracts.
What is the test of whether a contract term is “unfair”? A contract term is nothing more than a part of a contract.
The courts will ask the following kinds of questions to determine if a contract term is unfair:
Does the term cause an imbalance in the rights and obligations of the parties?
Is the term necessary in order to protect the party who has the advantage of that clause?
Would the term cause detriment to the party that it is used against?
It is also relevant whether the term is written in plain language and is available.
It is important to note, that an unfair clause or term does not make the entire contract unenforceable, it is only the unfair term that is unenforceable.
