18 Mar 2011

The Australian Consumer Law: unfair contract terms and the transport industry

by Trina Storm

If you issue transport tickets to consumers, or transport goods for consumers under consignment notes or fixed conditions of carriage, you'll need to comply with the new Australian Consumer Law.

The Australian Consumer Law (ACL) has been introduced to bring together into one national law the various consumer protections that have been available in different Australian jurisdictions. Each State and Territory has passed laws to adopt or mirror the Commonwealth legislation.

A key element in the new laws is the Unfair Contract Terms provisions, which affect standard form contracts between business and consumers, such as airline tickets, consignment notes and conditions of carriage.

Those with responsibility for monitoring compliance with the consumer laws should ensure that they are aware of all of the changes to the legislation, and in particular that their standard form contracts comply with it.

What is the new Australian Consumer Law?

The ACL was passed by way of a two-stage process. The first stage involved the incorporation of the Unfair Contract Term provisions into the Trade Practices Act (TPA) which were effective from 1 July 2010.

The second stage involved changing the name of the TPA to the Competition and Consumer Act and the wholesale introduction of the ACL into the Competition and Consumer Act as a new Schedule 2. The second stage came into effect on 1 January 2011.

In addition to new provisions concerning unfair contract terms, the ACL includes all of the consumer protection provisions which were already included in the TPA: misleading or deceptive conduct, unconscionable conduct etc. In each case, the law now applies to "a person" as opposed to being limited to a corporation.

In some instances, the drafters have taken the opportunity to clarify the language used. In other cases, they have taken the opportunity to expand the statutory provisions. 

Unfair Contract Terms

The Unfair Contract Terms provisions apply to consumer contracts which are in standard form.

A consumer contract is one for supply of goods or services to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption. A term of a consumer contract is void if the term is unfair.

The question whether goods or services have been acquired for personal, domestic or household use or consumption is a subjective one. Transport providers may be unable to distinguish between passengers travelling for business or for recreation or between goods which are being carried for business or personal purposes.

In the case of passenger transport, it is arguable that the service provided by the transport provider to the passenger is only ever provided to a natural person, even if the passenger is travelling for business. Until there is some case law to provide clarity, transport providers should assume that all passenger services provided will be caught by the Unfair Contract Terms provisions, whether travel is supplied in business class or otherwise.

Similarly, in the case of carriage of goods, transport service providers should assume that their services are being provided for personal use unless the consignor or consignee is a body corporate or otherwise clearly acting in a business capacity or for a business purpose.

Fairness of a consumer contract

A term of a consumer contract is unfair if:

  • it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
  • it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
  • it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

How will the courts interpret this?

First, they may look at how transparent the term is (is it plain language, legible, accessible?).

Secondly, they will consider the whole contract in assessing how fair or unfair the term is. In fact, the courts can take into account a context even wider than the contract itself. In Jetstar Airways Pty Ltd v Free [2008] VSC 539, for example, the court noted that it was common industry practice to distinguish between flexible and less flexible fares. This distinction in the level of service available counterbalanced the apparently higher fees charged to alter the name on a ticket.

Cases from other jurisdictions give some guidance as to what is meant by "significant imbalance"; it has been said that this requires a quantitative element. Analogous phrases may be "significant in magnitude", "sufficiently large to be important" or "substantial". Precise definition is impossible as the word "significant" requires a factual context in order to have meaning.

Unfairness is an objective concept which is to be determined at the time of making the contract (ie. the point at which a ticket to travel is purchased or the goods consigned to the transport provider).

The ACL includes a grey list of some provisions that may be found to be unfair, but even in a case involving one of the examples in the list, the question will depend on the evidence and each case will turn on its own facts.

There is a statutory presumption that a clause in a standard term contract is not reasonably necessary and the burden is on the party seeking to rely upon the term to show that it is.

A term that defines the main subject matter of the contract or the upfront price payable falls outside the ambit of section 23.


Courts now can make declarations regarding the fairness of contract terms in standard form consumer contracts.

A declaration can feed into other remedies available under the Competition and Consumer Act. If a declaration is made, it is on the basis that the term is judged unfair on an objective basis, and the declaration may be evidence of unfairness in other cases involving the same facts. So, for instance, a court may grant an injunction to prevent a party from relying on a term in a standard form contract that has previously been judged to be unfair.

Public warning notices

The ACCC may issue a public warning notice without first going through any court procedures, where it has reason to believe that there has been a contravention of the law, and that people have, or are likely to, suffer detriment and it is in the public interest to issue a warning.

Orders for non-party consumers

Where enforcement action has been taken for an offence under the ACL, the court may make an order in respect of other consumers who may be affected by the conduct which is in contravention of the ACL. Non-party consumers can choose to accept the redress offered by the order made by the court or bring their own proceedings against the person who has breached the ACL.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.