The Law Handbook 2024

694 Section 7: Consumers, contracts, the internet and copyright cars, food, groceries and fuel. Most of Mr Kobelt’s customers were Indigenous Anangu people who lived in two remote communities. These customers were poor and had low levels of literacy and numeracy. From 2008, Mr Kobelt supplied a form of credit to his customers called the ‘book-up’ credit system. The system involved payment for goods being deferred in whole or in part, subject to the customer giving Mr Kobelt their bank keycard and the PIN linked to the bank account. This bank account had to be the account into which the customer’s wages or Centrelink payments were credited. Very few transactions were documented carefully or at all. Most of the ‘book-up’ credit was supplied so customers could purchase second-hand cars. Because Mr Kobelt withdrew the customers’ wages or Centrelink payments as soon as they were credited to their bank accounts, the customers had no money to buy groceries. However, Mr Kobelt would let customers use a portion of what he had withdrawn during a particular pay period (up to 50 per cent) to purchase groceries. This meant that customers were tied to using his store. The trial judge found that Mr Kobelt’s conduct was unconscionable and contrary to section 12CB of the ASIC Act. This decision was overturned by the full Federal Court. Then the majority of the High Court found that the conduct was not unconscionable. The High Court determined that the ‘book-up’ system had advantages for the Anangu people unrelated to their lack of education and financial acumen (including the capacity to deal with a bust and boom economy, to avoid paperwork, and to avoid the ‘demand sharing’ or ‘humbugging’ of economic resources by relatives that is characteristic of many Indigenous societies). It was also held that Mr Kobelt did not act systematically in bad faith, and that he was willing to negotiate with customers if they neededmoney. It was pivotal that customers could end their relationship with Mr Kobelt by cancelling their bank cards and chose to continue their relationship. In contrast, the minority judges found the conduct was unconscionable because Mr Kobelt took advantage of the Anangu customers’ special disadvantage and the system was discriminatory and unfair. Unfair contract terms The ACL and the ASIC Act regulate unfair contract terms in standard form contracts that were entered into after 1 January 2011. For consumer contracts entered into before that date, unfair contract terms were regulated by the Victorian FTA. There are a number of differences between the national unfair contract term laws and the previous Victorian unfair contract term laws. The discussion below outlines the approach taken by the ACL and the ASIC Act. Since 12 November 2016, the unfair contract term provisions in both the ACL and ASIC Act have applied to certain small business contracts. From 5 April 2021, unfair contract terms also apply to insurance contracts that were previously exempted from the regime. What is an unfair term? The ACL and the ASIC Act provide that unfair terms in covered contracts are void. A term is ‘unfair’ when: • it causes a significant imbalance in the parties’ rights and obligations arising under the contract; • it is not reasonably necessary to protect the legitimate interests of the supplier; and • it causes financial or non-financial detriment to a party (s 24(1) ACL; s 12BG(1) ASIC Act). A court must consider the transparency of the term and the contract as a whole in determining whether a term is ‘unfair’ (s 24(2) ACL; s 12BG(3) ASIC Act). Terms that relate to the main subject matter of the contract cannot be challenged under these provisions. For insurance contracts, the main subject matter of the contract describes what is being insured. Terms that relate to the upfront price of the contract also cannot be challenged. However, payments made under a contract that are contingent on the occurrence or non-occurrence of an event are examinable under the unfair contract terms provisions (s 26 ACL; s 12BI ASIC Act). To what contracts do ‘unfair term’ laws apply? The unfair term laws only apply to standard form consumer contracts and small business contracts. A ‘consumer contract’ is an agreement for the supply of goods or services, or the sale or grant of an interest in land, that is wholly or predominantly for personal, domestic or household use or consumption (s 23(3) ACL; s 12BF(3) ASIC Act). This means that the agreement must relate to goods or services that are usually meant for consumers, rather than businesses, and that they are being supplied for use