A new law stipulates that all contracts must be fair to the end user, writes Michael Leahy.

As a consumer, it’s likely that you enter into a number of contracts every day – even if you don’t realise it. Each time you make a purchase, hire a tradesperson, book a holiday, join the gym, top up your phone account, or download music, you are entering a contract.

Now, all standard contracts with consumers must be fair. This is a new Australia-wide law, which applies to all contracts made after 1 July 2010.

This means that individuals who can show that the standard contract operates unfairly on them can have the problem resolved in their favour.

The legal test for unfairness is that while businesses may use standard terms in consumer contracts to protect their legitimate commercial interests and improve efficiency, unfairness occurs when the consumer loses out financially or otherwise, because the supplier has more power.

How do we recognise a potentially unfair term? The following guides are by the ACCC:

• Does the term cause a significant imbalance between your rights and obligations and those of the business?

• Does the business have more power than you? Are you penalised if the contract is terminated (through no fault of your own) but the business is not? Can the business change important terms of the contract without asking you? Can only the business decide if the contract has been breached?

• Is the clause reasonably necessary to protect the legitimate interests of the business? While it may appear to you that a term is unfair, the business may have a genuine commercial reason for including it. However it is up to the business to prove to the court that it has a good reason.

• Would the term cause you detriment (financial or non-financial) if the business tried to enforce it? Would you lose money or suffer inconvenience, delay or distress, if the term was enforced?

• How transparent is the term? Can you understand what the term says? Is the term presented clearly and expressed in reasonably plain language? Or is it hidden in fine print or written in complex technical language?

• The fairness of a term must be considered in the context of the contract as a whole. For example, what is unfair in one context might not be unfair in another. You might have extra rights or benefits in the contract that balance the potential unfairness of a term.

This new law gives consumers more strength in sorting out problems with suppliers.

Michael Leahy is a specialist business lawyer with over 30 years’ experience in commercial and estate law. He is available to assist on 0416 203 205 or email [email protected].