Under Part 2.3 of the Australian Consumer Law (ACL) unfair contract terms in standard form consumer contracts are void. The contract will continue to bind the parties, however, if it can still operate without the unfair term.

In Australian Competition and Consumer Commission v Bytecard Pty. Limited (judgment not yet available online) the Federal Court declared that a number of clauses in ByteCard’s standard form consumer contracts for internet access services were unfair and therefore void.

The Federal Court declared, by consent, that 4 clauses of ByteCard’s standard terms and conditions are unfair contract terms. The unfair contract terms:

• enabled ByteCard to unilaterally vary the price under an existing contract without providing the customer with a right to terminate the contract;
• required 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; and
• enabled ByteCard to unilaterally terminate the contract at any time with or without cause or reason.

The terms were considered unfair as they:

• created a significant imbalance in the parties’ rights and obligations;
• were not reasonably necessary to protect ByteCard’s legitimate interests; and
• if applied or relied upon by ByteCard, would cause detriment to a customer.

The decision gives an indication of what types of clauses the ACCC is taking an interest in and guidance when determining whether similar terms could be unfair or not.

“Standard form” is not defined in the legislation, but it usually means that the same terms are offered to all without negotiation.

In May 2013 the ACCC published a report on the outcome of its industry review of unfair contract terms.

The ACCC reviewed standard form consumer contracts in the airline, telecommunications, fitness and vehicle rental industries, as well as some contracts commonly used by online traders. A select number of standard form contracts used by prominent travel agents were also examined.

The law does not apply to insurance contracts, because the Insurance Contracts Act 1984 (Cth) provides that an insurance contract cannot be the subject of relief under any Commonwealth Act on grounds of unfairness. However the Commonwealth Government introduced the Insurance Contracts Amendment (Unfair Terms) Bill 2013 into Parliament prescribing that general insurance contracts are also subject to the Australian Consumer Law. The Bill lapsed with the calling of the election.