7Patty PPTW11 2014_CLAW5001_restraints

1、CLAW5001 Legal Environment of Business,Statutory restraints on freedom of contract Unfair terms in consumer contracts + unconscionable conduct + anti-competitive conduct,Patty Kamvounias,2,Overview of Todays Lecture,Statutory restraints on freedom of contract: Common law background Competition and C

2、onsumer Act 2010 (Cth) Schedule 2 Australian Consumer Law: Chapter 2 General Protections Part 2-2 unconscionable conduct Part 2-3 unfair terms in consumer contracts Competition and Consumer Act 2010 (Cth) Part IV Restrictive Trade Practices (anti-competitive conduct) Preview of next weeks lecture: m

3、isleading or deceptive conduct,2,recall topic 2: finding statute law,Competition and Consumer Act 2010 (Cth) was called the Trade Practices Act 1974 (Cth) until renamed as from 1 January 2011 available online at .au/au/legis/cth/consol_act/caca2010265/ Where can you find the com

4、petition provisions in the Act? Where can you find the consumer provisions in the Act?,3,Discussion Question,Jo Ng and Frances Ng, a Vietnamese couple, who had been in Australia for 8 years, had been running a small business as market gardeners. They grew a number of Asian vegetables and herbs in th

5、eir garden and were able to sell everything that they grew. They became well aware of the growth of demand for such vegetables and herbs and wanted to develop this business further. However their poor English language skills and little understanding of business had prevented them from doing so. Fran

6、k Tomisomo, a local businessman with a number of business interests is also the owner of large areas of land in the neighbourhood. He became aware of Jo and Frances Ngs business through some mutual friends from the local church. Frank contacted Jo and Frances and told them that he has some land that

7、 may suit their needs. Although Jo and Frances are satisfied with the land and rental, they were reluctant to enter into a contract with Frank. However they did go ahead with signing the contract when Frank assured them that they would be able to have the lease for four years on the same terms. The

8、lease that Frances and Jo signed, however, was only for a period of one year.,4,4,Discussion Question,One year later, Frank changed the terms of the lease. He raised the rent by 75% and imposed a limit on the amount of water that could be used by the tenants. Frank had sold the water rights to anoth

9、er neighbour for an extra fee. Without understanding the changes to this new lease, Jo and Frances signed it. At the end of the year Frank demanded that they pay $38,000 which comprised the excess water rates that had been incurred ($16,000) as well as the extra rent that was due ($22,000). When Jo

10、and Frances queried this they were pointed to clause 24 in their contract which stated “the parties waive any rights they may have under any law in Australia”. Advise Jo and Frances on their rights in these circumstances.,5,5,Unfair contract terms,6,Background recall topic 6: terms of a contract rec

11、all topic 7: factors affecting the contract,Traditional common law doctrine parties are free to make their own contract on their own terms (freedom of contract) role of the court is to interpret the contract and not to rewrite the contract (sanctity of contract) equity will intervene to set aside th

12、e contract in certain circumstances (factors affecting the contract) Is legislation on unfair terms in contracts necessary?,7,Background: terms of a contract state initiatives,Before the ACL, Victoria is the only jurisdiction with specific legislation dealing with unfair terms in consumer contracts

13、In 2003, Victoria Parliament introduced unfair contracts terms provisions in Fair Trading Act 1999 (Vic) Part 2B Origins? UK: Unfair terms in consumer contracts regulations1994 Director General of Fair Trading v First National Bank 2001UKHL 52 Vic. statute enabled VCAT (the Victorian Civil and Admin

14、istrative Tribunal) to declare unfair terms in consumer contracts and issue injunctions prohibiting continued use of unfair terms Note: Key definitions in Part 2-3 of the ACL differ from those in the FTA (Vic) so the case law interpreting and applying the Victorian legislation will not necessarily a

15、pply to the equivalent provisions in the ACL.,8,Unfair terms in consumer contracts,ACL Chapter 2: Part 2-3 prohibits unfair terms in consumer contracts NO equivalent provisions in Trade Practices Act 1974 (Cth) New national unfair contract terms law commenced on 1 July 2010 at Commonwealth level wit

16、h mirror provisions applying from that date in Victoria and NSW until the commencement of the entire ACL on 1 January 2011 Unfair terms in consumer contracts are void: If court finds term is unfair it is treated as if it never existed; but the rest of the contract remains in effect When do the provi

17、sions in Part 2-3 apply?,9,unfair contract terms: key provisions,Section 23 (1) A term of a consumer contract is void if: (a) the term is unfair; and (b) the contract is a standard form contract.,Elements: 1. the contract is a consumer contract 2. the contract is a standard form contract 3. the cont

18、ract contains a term that is unfair,10,unfair contract terms: the consequences,Section 23 (2) The contract continues to bind the parties if it is capable of operating without the unfair term.,Effects: 1. If a term in a standard form consumer contract is found to be unfair within the meaning of the p

19、rovisions of the ACL, the term is void: section 23(1). 2. What effect does this have on the contract as a whole? If the contract is capable of operating without the unfair term, the contract continues to bind the parties: section 23(2).,11,what is a consumer contract?,Section 23 (3) A consumer contr

20、act is a contract for: (a) a supply of goods or services; or (b) a sale or grant of an interest in land; to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption.,Elements: 1. contract for a supply of good

21、s or services or interest in land 2. supply to an individual 3. acquisition is wholly or predominantly for personal, domestic or household use or consumption.,12,what is a consumer contract?,13,Note the definition of consumer contract in section 23(3) (for the purposes of the unfair terms provisions

22、) is different from the definition of consumer in section 3 (for the purposes of the consumer guarantee provisions) For a consumer contract focus is on the subjective intention of the individual acquiring the goods, services or land; whereas to be a consumer the focus is on the type of goods or serv

23、ices acquired. Note: Contracts to supply goods or services from one business to another for business use are not included in definition of consumer contract,recall topic 9: meaning of consumer acquiring goods as a consumer,Section 3 (1): A person is taken to have acquired particular goods as a consu

24、mer if, and only if: (a) the amount paid or payable for the goods did not exceed: (i) $40,000; or (ii) if a greater amount is prescribed for the purposes of this paragraph-that greater amount; or (b) the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption;

25、 or (c) the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads.,14,recall topic 9: meaning of consumer NOT acquiring goods as a consumer,Section 3(2): However, subsection (1) does not apply if the person acquired the goods, or held himself

26、or herself out as acquiring the goods: (a) for the purpose of resupply; or (b) for the purpose of using them up or transforming them, in trade or commerce: (i) in the course of a process of production or manufacture; or (ii) in the course of repairing or treating other goods or fixtures on land,15,N

27、ote: section 3(2) excludes certain goods from the consumer guarantees based on a particular acquirers purpose in acquiring the goods.,recall topic 9: meaning of consumer acquiring services as a consumer,Section 3 (3): A person is taken to have acquired particular services as a consumer if, and only

28、if: (a) the amount paid or payable for the services .did not exceed: (i) $40,000; or (ii) if a greater amount is prescribed for the purposes of subsection (1)(a)-that greater amount; or (b) the services were of a kind ordinarily acquired for personal, domestic or household use or consumption.,16,Unf

29、air contract terms: should law apply to contracts entered into by small business?,Clancy Yeates Sydney Morning Herald 20 March 2012 Small-business owners have long complained that the law fails to protect their interests during dealings with the big end of town. Council of Small Business Australia e

30、xecutive director Peter Strong said a key irritation was that the laws assumed small and big businesses had equal bargaining power. If youre one person and youre negotiating with a multinational its considered equal, but obviously its not, Mr Strong said. A small business will almost never defeat a

31、big business in a contract dispute. Its about fairness, thats all. The Coalition has pledged to tackle some of these concerns by extending unfair contract provisions - which only apply to agreements between large firms and consumers - to small business. Read more: .au/small-business/small-business-u

32、rged-to-detail-power-struggles-20120319-1vfqs.html#ixzz1puWrx03s,17,what is a standard form contract?,Section 27 (1) If a party to a proceeding alleges that a contract is a standard form contract, it is presumed to be a standard form contract unless another party to the proceeding proves otherwise.,

33、- Is the contract a standard form contract? This is a question of fact BUT section 27 provides a rebuttable presumption - consumer contract is presumed to be a standard form contract (unless the business relying on the term proves otherwise),18,what is a standard form contract?,Section 27 (2) In det

34、ermining whether a contract is a standard form contract, a court may take into account such matters as it thinks relevant, but must take into account the following: (a) whether one of the parties has all or most of the bargaining power relating to the transaction; (b) whether the contract was prepar

35、ed by one party before any discussion relating to the transaction occurred between the parties; (c) whether another party was, in effect, required either to accept or reject the terms of the contract (other than the terms referred to in section 26 (1) in the form in which they were presented; ( d) w

36、hether another party was given an effective opportunity to negotiate the terms of the contract that were not the terms referred to in section 26 (e) whether the terms of the contract (other than the terms referred to in section take into account the specific characteristics of another party or the p

37、articular transaction; (f) any other matter prescribed by the regulations,19,what is a standard form contract?,Standard form contract is not defined in the ACL section 27(2) provides that a court may take into account any matters it thinks relevant, but must take into account certain matters listed

38、a standard form contract is generally one prepared by one party and not subject to negotiation between the parties take it or leave it Standard form contracts typically used in telecommunications (internet, phone, pay TV) banking and financial services including credit gym memberships utility servic

39、e contracts transport airline tickets, car rentals,20,are all standard form contracts included?,Some standard form consumer contracts and terms are also exempt Contracts with respect to financial products and services are subject to the unfair contract terms provisions in the new Part 2 Division 2 o

40、f the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act).,21,are all standard form contracts included?,Some standard form consumer contracts and terms are also exempt Terms that define the main subject matter of the contract or set the upfront price payable under the cont

41、ract or term is required or expressly permitted by a law of the Commonwealth a State or a Territory cannot be challenged under these provisions: section 26(1). Contracts of marine salvage or towage; or a charterparty of a ship; or a contract for the carriage of goods by ship are excluded: section 28

42、(1); contracts that are constitutions of a company, managed investment scheme or other kind of body: section 28(3). Insurance contracts are regulated entirely by the Insurance Contracts Act 1984 (Cth) and are beyond the scope of the provisions in the ACL or the ASIC Act dealing with unfair terms. BU

43、T recent developments/public consultations may foreshadow changes to the unfair contract terms provisions in the ACL and the ASIC Act in the future,22,meaning of unfair?,Section 24 (1) A term of a consumer contract is unfair if: (a) it would cause a significant imbalance in the parties rights and ob

44、ligations arising under the contract; and (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and (c) it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.,Each of thes

45、e three requirements must be satisfied for the term to be unfair within the meaning of the ACL.,23,meaning of unfair?,Section 24 (2) In determining whether a term of a consumer contract is unfair under subsection (1), a court may take into account such matters as it thinks relevant, but must take in

46、to account the following: (a) the extent to which the term is transparent; (b) the contract as a whole.,24,when is a term transparent?,Section 24 (3) A term is transparent if the term is: (a) expressed in reasonably plain language; and (b) legible; and (c) presented clearly; and (d) readily availabl

47、e to any party affected by the term.,25,Examples of unfair terms,Section 25(1) of the ACL provides a non-exhaustive list of examples of what may be unfair terms in consumer contracts depending on the particular circumstances. Referred to as a grey list (cf black list) Statutory list of examples of p

48、otential unfair terms Examples listed are not deemed to be unfair but are provided as guidance as to the type of terms that may cause concern,26,Examples of unfair terms,Section 25(1) grey list includes: a term that permits, or has the effect of permitting, one party (but not another party) to avoid

49、 or limit performance of the contract; terminate the contract; vary the terms of the contract; renew or not renew the contract; to vary the upfront price payable under the contract without the right of another party to terminate the contract; to vary the characteristics of the goods or services to b

50、e supplied, or the interest in land to be sold or granted, under the contract to assign the contract to the detriment of another party without that other partys consent;,27,Examples of unfair terms,Section 25(1) grey list includes: a term that penalises, or has the effect of penalising, one party (b

51、ut not another party for a breach or termination of the contract; a term that limits, or has the effect of limiting one partys vicarious liability for its agents; right to sue another party; a term that limits, or has the effect of limiting, the evidence one party can adduce in proceedings relating

52、to the contract; a term that imposes, or has the effect of imposing, the evidential burden on one party in proceedings relating to the contract; a term of a kind, or a term that has an effect of a kind, prescribed by the regulations.,28,recall topic 3: legal liability enforcement of unfair terms,Unf

53、air contract terms law can be enforced by individual consumers and ACCC, ASIC and state and territory consumer protection agencies Court orders include: Injunction for contravention of Chapter 2 (includes unfair terms): s232 Damages to person who suffers loss because of contravention; s236 Compensat

54、ion order on application of person who suffers loss or regulator: s237 Declaration that a term is an unfair term: s250 But NO pecuniary penalty (s224) and NO criminal proceedings (s217) ACCC may also: Issue a public warning notice (s223) Take an undertaking (s218),29,Unfair contract terms: some guid

55、ance from Harbison J in Victoria,30,Director of Consumer Affairs Victoria v Craig Langley Pty Ltd - others not so cooperative! ACCC now considering whether to take action.,36,First case dealing with ACL unfair contract terms,ACCC v Bytecard Pty Limited (Federal Court, 24 July 2013, VID301/2013) orde

56、r available on the Commonwealth Courts Portal,.au/file/Federal/P/VID301/2013/actions Internet service provider Terms all one sided, vague and inconsistent E.g. Term that entitled provider to unilaterally vary the price payable by a consumer under an existing contract without providing prio

57、r notice; an opportunity to negotiate; or right to terminate the contract Why is term unfair? Because creates significance imbalance in rights and obligations; not reasonably necessary to protect providers interests; and if relied upon by provider would cause detriment to a customer See also ACCC me

58、dia release 174/13 (30 July 2013) available at .au/media-release/court-declares-consumer-contract-terms-unfair,Unconscionable conduct: -general law -state legislation -commonwealth legislation,Recall topic 7: general law unconscionable conduct,Unconscionable conduct = conduct “show

59、ing no regard for conscience; irreconcilable with what is right or reasonable” Equity will intervene when stronger party takes unfair and improper advantage of another partys special disability Examples of a special disability include: Ignorance of material facts known to the other party Illiteracy or lack of education Poverty or need of any kind Age Infirmity of body or mind Drunkenness Lack of assistance or explanation where these are necessary I