The Law Handbook 2024

Chapter 7.2: Consumer protection laws 697 • indemnity clauses – where the customer must compensate the bank if any liability is incurred in circumstances that are, among other things, not of material risk to the bank, not in the customer’s control, and could have been mitigated by the bank; • event of default clauses – where the bank can declare an event or circumstance as constituting the customer’s default; this allows the bank to take certain actions (e.g. cancelling the loan facility); • unilateral variation and termination clauses – the bank had a one-sided discretion to cancel or reduce the loan facility even though the customer is compliant with their loan repayments, and to impose a termination fee on the customer regardless of the reason for the termination; • conclusive evidence clauses – the bank can place an evidential burden on the customer for matters that the bank is better positioned to provide evidence for. The court also noted the lack of transparency of the relevant terms, including: • multiple cross-references in the indemnity clause; • catch-all drafting phrases (e.g. ‘without limitation’); • instances where a defined term had no relation to its actual definition; • clause headings and clause locations that were not logical or transparent; and • the use of convoluted ‘legal language’ (including phrases such as ‘manifest error’ and ‘legal expenses on a full indemnity basis’. Effect of an unfair contract term As stated, an unfair contract term is ‘void’. This means that it should be treated as if it had never come into existence. Consumers can therefore rely on these provisions as a defence to debt collection or contract enforcement actions. Importantly, a contract containing an unfair term or a prescribed unfair term will continue to bind the parties if it can exist without that term, even though the term itself is void. Consumers can also commence their own action to enforce their rights or to recover loss or damage incurred for breach of the unfair contracts laws. • From October 2023, the powers of the ACCC, ASIC and state and territory consumer protection agencies in relation to unfair contract terms have been enhanced. In addition to being empowered to seek a declaration that a term of a contract is unfair, the regulator can seek orders to void, vary or refuse to enforce the contract, if this is appropriate to prevent loss or damage that is likely to be caused. The regulator can also seek orders preventing a term that is the same or substantially similar in effect to a term that has been declared as unfair, from being included in any future standard form contracts. Importantly, the regulator can now seek pecuniary penalties in relation to unfair contract terms. Unsolicited sales practices Key rules under the ACL The ACL includes a single national law covering unsolicited sales practices, including door-to-door selling, telephone sales and other forms of direct selling that do not take place in a retail context. The unsolicited consumer agreements law in the ACL contains the following key rules: • supplier obligations about the way in which con­ sumers are approached; • supplier disclosure obligations about making contracts; • consumer rights, including a 10-day cooling-off right and the right to terminate a contract after the cooling-off period in various circumstances; and • supplier obligations about post-contractual behaviour. Definition of ‘unsolicited consumer agreements’ Section 69(1) of the ACL provides that an ‘unsolicited consumer agreement’ has four elements: 1 The agreement must be for the supply, in trade or commerce, of goods or services to a consumer. 2 The agreement must have resulted from negotiations between a dealer and the consumer either in person (at a place other than the supplier’s place of business) or by telephone. 3 The consumer must not have invited the dealer to contact them for the purpose of entering into negotiations to supply goods or services.* 4 The total price paid or to be paid under the agreement is over $100 or cannot be determined at the time the agreement is made.