The Law Handbook 2024

Chapter 7.1: How contract law works 681 Second, the special relationship, although not falling within any well-recognised relationship, is such that the complaining party is able to show that the other party was in a position of influence. For example, it could be that the circumstances of a particular relationship between a bank and its customer gives rise to the bank occupying a special position of trust in connection with the conduct of the customer’s affairs. (It has to be stressed that in ordinary circumstances no presumption of undue influence arises out of a banker–customer relationship.) See, for example, Commercial Bank of Australia Ltd v Amadio [1983] HCA 14 (for a summary of the Amadio case, see ‘Unconscionable conduct’ in Chapter 7.2: Consumer protection laws). The consequence of establishing undue influence is that the contract may be held voidable at the election (i.e. the choice) of the weaker party. For details of complaints of undue influence in relation to some types of loan contracts and related complaints of unjust contract, unconscionable dealings, harsh and oppressive contracts, etc., see ‘Unjust contracts’ in Chapter 5.8: Mortgages, consumer leases and other finance products. As with duress, undue influence is also likely to be a contravention of various provisions of the ACL where undue influence is exerted in ‘trade or commerce’. This includes unconscionable conduct under sections 20, 21 and 22 of the ACL, which would give rise to a broader range of remedies, including rescission and damages (see ‘Unconscionable conduct’ in Chapter 7.2: Consumer protection laws). Unfair contract terms in standard form contracts WHAT IS A STANDARD FORM CONTRACT? A standard form contract is a contract that has been prepared by one party and the other party has little or no opportunity to negotiate the contract’s terms. In other words, the contract is offered on the basis of ‘take it or leave it’. While previously only applying to consumer contracts, the regulations now extend to small business contracts entered into or renewed on or after 12 November 2016. Unfair contract terms in standard form contracts are regulated by the ACL. Where a term of a standard form contract has been held to be unfair, the term is deemed to be void. However, the contract will continue to bind the parties if it can operate without the unfair term. A term is unfair when: • it causes a significant imbalance in the parties’ rights and obligations under the contract; and • it is not reasonably necessary to protect the legitimate interests of the supplier; and • it causes detriment to another party. In determining whether a contract term is unfair, a court must consider the transparency of the term and the operation of the contract as a whole. For example, highly advantageous terms might be balanced against other disadvantageous terms. Certain terms cannot be determined to be unfair (e.g. the price of a good, service or the main subject). Unfair contract terms are discussed in more depth in Chapter 7.2: Consumer protection laws. 6 Illegal and void contracts The law will not enforce all contracts. A contract (or a term of a contract) that involves illegal conduct may be void and unenforceable. Whether contracts that are illegal by statute will be deemed void and unenforceable depends on the particular statute and the ordinary principles of statutory interpretation. Contracts absolutely prohibited by statute will be deemed to be void, whether the parties know of the illegality or not. However, where one party performs a legal contract in an illegal manner, the other party (if they have no knowledge of the illegality) may still enforce the contract or recover damages for breaching it. They may also recover money or other property transferred under the contract. The precise extent of the enforceability of, or the recovery of any money paid under, a void contract depends on the statute. Certain types of contracts are illegal at common law because they are contrary to public policy. These include contracts: • to commit a crime, a tort or a fraud; • that are sexually immoral; • that prejudice public safety, including good relations with other states or countries; • that prejudice the administration of justice; • that tend to promote corruption in public life; • to defraud the revenue; • to oust the jurisdictions of the courts; • that are prejudicial to the status of marriage; • in restraint of trade (unless the restraint is