When does the Unfair Contract Term law not apply?

In our previous article we examined the situations in which unfair contract term law applies. While unfair contract term laws apply to most standard form contracts and contractual terms, there are a number of excluded contracts and excluded terms. We discussed these below.

Excluded contracts:

  • Contracts entered into a date prior to the commencement of the unfair contract term laws, as applicable between consumer and business contracts, are excluded from the operation of the unfair contract term laws.
  • Contracts which are expressly excluded by section 28 of Australian Consumer Law: including contracts of marine salvage or towage, ship charter contracts, contracts for the carriage of goods by ship, constitutions of a corporation, managed investment scheme or other kind of body.
  • Contracts for financial services. Financial services are excluded from Australian Consumer Law by section 131A of the Competition and Consumer Act. Financial services are regulated separately under the ASIC Act.
  • Insurance contracts that are regulated by the Insurance Contracts Act 1984 (Cth). This act does not apply to private health insurance contracts, state and Commonwealth government insurance contracts, reinsurance contracts, and others.

Excluded terms:

  • a term that defines the main subject matter of the contract;
  • a term that sets the upfront price payable under the contract; and
  • a term required, or expressly permitted, by law of the Commonwealth, a State or a Territory.

Upfront price and subject matter are considered matters which parties exercise choice in deciding to proceed with a contract and are, therefore, excluded. This was explained in the second explanatory memorandum to the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010:

where a party has decided to purchase goods, services, land, financial services or financial products that are the subject of the contract, that party cannot then challenge the fairness of a term relating to the main subject matter of the contract at a later stage, given that the party had a choice of whether or not to make the purchase on the basis of what was offered.

In deciding whether a contract or term type is excluded from the unfair contract terms law, it is important to consider the law as of the date that the contract is entered into as an assumption that the law does not apply may be incorrect with serious consequences.

Who to Contact for More Information

Please get in touch if you have any questions on the above.