Kara Sears
The Australian Consumer Law (ACL) protects consumers from unfair terms in standard form contracts and misleading or deceptive business conduct. It applies to 'standard form' consumer contracts for the supply of goods and services, or for the sale or grant of an interest in land. Consumers who breach a contract may have to compensate a business for any losses incurred, and vice versa. A breach of contract occurs when one party fails to perform their obligations according to the terms of the contract. If a breach of contract is established, the aggrieved party may have the right to terminate the contract and/or seek a remedy.
| Characteristics | Values |
|---|---|
| What is Australian Consumer Law? | A national law to protect consumers. |
| Who does it apply to? | Anyone conducting business in Australia, including overseas businesses. |
| What does it govern? | Product safety, consumer guarantees, fair contract terms, and fair sales practices. |
| What are the requirements for businesses? | Businesses must ensure that contracts are performed with due care and skill, and must not include unfair terms. |
| What is considered an unfair term? | A term that is one-sided and greatly favours the business, has no satisfactory commercial reason, and would cause financial loss or other disadvantages to the consumer if enforced. |
| What happens if a contract term is unfair? | If a court finds a contract term to be unfair, it is void and treated as if it never existed. |
| What are the remedies for consumers in case of a breach of contract? | Consumers may have the right to terminate the contract, seek damages or nominal damages, or specific performance. They can also claim monetary compensation and/or orders for breaches of Chapter 2 of the ACL, including setting aside the contract and obtaining a refund. |
| What are the requirements for contracts? | Contracts must include total cost, postal/delivery charges, sales agent and seller's contact details, and a notice about the right to cancel within a specific time period. |
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What You'll Learn
Breach of contract and consumer rights
In Australia, the Australian Consumer Law (ACL) protects consumers from unfair terms in standard form contracts. A standard form contract is a contract between two parties where one party prepares the contract, giving the other little to no opportunity to negotiate the terms. The ACL applies to 'standard form' consumer contracts for the supply of goods and services, or for the sale or grant of an interest in land.
A breach of contract occurs when at least one party fails to perform their obligations according to the terms of the contract. If a breach of contract is established, the aggrieved party may have the right to terminate the contract and/or seek a remedy. The right to terminate the contract may not always apply for every breach that occurs. If a breach of contract is disputed, the aggrieved party may need to take further action to resolve the dispute, such as commencing court proceedings.
A consumer who has suffered loss or damage due to misleading conduct can claim monetary compensation and/or orders that may be made for breaches of Chapter 2 of the ACL, including setting aside the contract and obtaining a refund. Businesses are not allowed to make statements that are incorrect or likely to create a false impression. This rule applies to their advertising, product packaging, and any information provided by their staff or online shopping services.
The ACL also governs product safety in Australia. This means that the products supplied must be safe and meet consumer guarantees. Businesses cannot sell banned or recalled products and must ensure that their products or product-related services comply with relevant mandatory safety and information standards before they are offered for sale. Consumers are entitled to receive goods of acceptable quality, fit for the purpose for which they are bought, and match the description, sample, or demonstration model provided.
Additionally, the ACL requires that contracts do not contain unfair terms. A contract term is generally considered 'unfair' if three conditions are met: the contract is one-sided and greatly favours the business over the consumer; there is no satisfactory commercial reason for the business to include such a term; and the consumer will suffer financial loss, inconvenience, or other disadvantages if the term is enforced. It is important to note that only a court can decide if a term is unfair, and if found unfair, the term is void and treated as if it never existed.
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Remedies for breach of contract
A contract is a binding agreement between two or more parties that sets out what each party must do and must not do. If a party breaches a contract, the other party can take action. Here are some remedies for breach of contract:
- Suing for specific performance: This is a court order specifically directing the party that is in default to carry out its contractual obligations. This is only available when proper compensation for the breach of contract will not be provided by damages, such as in a contract for the sale of land.
- Seeking an injunction: An injunction is a court order restraining a party from doing or repeating wrongful conduct. It can also be granted during court proceedings if there is a risk that a party may sell or deal with property that is the subject of a dispute.
- Suing for damages: Damages compensate a party for losses resulting from the breach of contract. If no loss was sustained, but a legal right was infringed, nominal damages may be awarded.
- Rescission of the contract: In some cases, a party may be able to rescind or terminate the contract due to a breach. This is not always possible, as the breach must be serious enough to entitle the innocent party to end the contract.
- Compensation: In certain cases, a party may be able to claim monetary compensation for losses or damage suffered due to the breach of contract.
- Amending or removing unfair terms: If a court finds that a contract term is unfair, it can be treated as void and not enforceable. This can include terms that are one-sided, cause financial loss, or significantly imbalance the rights and obligations of the parties.
- Performance by another party: The innocent party can choose to keep the contract going and perform their obligations, or they can refuse to perform their part of the contract.
- Suing on quantum merit: The law considers that the innocent party should receive something for the obligations they have performed. This allows them to take action against the breaching party for an amount equivalent to the goods or services provided.
It is important to note that the above remedies may vary depending on the specific circumstances of each case, and independent legal advice should always be sought.
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Unfair terms in standard form contracts
The Australian Consumer Law (ACL) protects consumers and small businesses from unfair terms in standard form contracts. A standard form contract is a contract between two parties where one party prepares the contract, leaving the other party little to no opportunity to negotiate the terms.
Standard form contracts are common and include contracts for phone plans, hotel bookings, and the sale of goods and services. When determining whether a term is unfair, the context of the contract as a whole must be considered. A term is considered unfair if it meets all three of the following conditions:
- The term would cause financial or other detriment to a consumer or small business if it were enforced.
- There is no satisfactory commercial reason for the business to require such a term.
- The term significantly imbalances the rights and obligations between the business and the consumer or small business.
If a court or tribunal finds a contract term to be unfair, it is void and treated as if it never existed. The rest of the contract will continue to apply if the unfair term can be removed without affecting the rest of the agreement. Consumers who breach a contract may have to compensate the business for any loss incurred, and vice versa.
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Misleading or deceptive conduct
The Australian Consumer Law (ACL) protects consumers from "misleading or deceptive conduct" in trade or commerce. This means that businesses are not allowed to make statements that are incorrect or likely to create a false impression. This rule applies to their advertising, product packaging, and any information provided by their staff or online shopping services.
- Small print and disclaimers that hide important information from consumers.
- Bait advertising and special offers that misrepresent products or prices.
- Pricing errors where products are advertised at incorrect prices.
- Promotions or advertisements that include false or inaccurate information.
To prove misleading or deceptive conduct, it must be shown that the claimant relied on the conduct to their detriment, meaning their reliance on the conduct caused their loss. It is not necessary to prove intention to mislead or deceive, or to prove loss or damage. However, if loss or damage has occurred, consumers can claim monetary compensation and/or orders for breaches of Chapter 2 of the ACL, including setting aside the contract and obtaining a refund.
The ACL also governs product safety in Australia, ensuring that products supplied are safe and meet consumer guarantees. This includes compliance with relevant mandatory safety and information standards before offering products for sale.
In addition to protecting consumers, the ACL also protects small businesses from unfair terms in standard form contracts. A standard form contract is a contract between two parties where one party prepares the contract, giving the other party little to no opportunity to negotiate the terms. To be considered unfair, a term must meet certain conditions, including causing financial or other detriment to a consumer or small business if enforced, and significantly imbalancing the rights and obligations between the parties. If a court finds a contract term to be unfair, it will be void and treated as if it never existed.
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Breach of contract and termination
A breach of contract occurs when one party fails to perform their obligations according to the terms of the contract. This can include failing to do what a clause states must be done within a certain time or manifesting an unwillingness or inability to perform the contract before the performance is due, which is considered an anticipatory breach.
The Australian Consumer Law (ACL) protects consumers from unfair terms in standard form contracts, which are contracts where one party prepares the contract with little to no opportunity for the other party to negotiate the terms. A contract term is considered unfair if it meets three conditions: it would cause financial or other detriment to the consumer if enforced, it significantly imbalances the rights and obligations between the parties, and there is no satisfactory commercial reason for the business to include the term. The ACL also requires businesses to make sure their contracts are performed with due care and skill.
If a breach of contract is established, the wronged party may have the right to terminate the contract and/or seek a remedy. The remedies available depend on the importance of the term that was breached. If a condition, or the most important term, is broken, the wronged party can terminate the contract and seek damages. Even if no loss can be proven, the wronged party is still entitled to nominal damages (around $100 according to recent case law). If a less important term, or warranty, is broken, the wronged party can still seek damages but may not have the right to terminate the contract.
In addition to damages, consumers who have suffered loss or damage due to misleading conduct by a business can claim monetary compensation and/or orders for breaches of Chapter 2 of the ACL, including setting aside the contract and obtaining a refund. Consumers can also seek specific performance, where a court compels the party who breached the contract to perform the contract.
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Frequently asked questions
A breach of contract occurs when at least one party fails to perform their obligations according to the terms of the contract.
The wronged party is entitled to damages, regardless of whether or not the breach has caused a loss. If no loss can be proven, the wronged party is still entitled to nominal damages. The aggrieved party may also have the right to terminate the contract and/or seek specific performance, where a court compels the party who breached the contract to perform the contract.
A contract term is generally considered unfair if three conditions are met: the term greatly favours the business over the consumer, there is no satisfactory commercial reason for the business to include the term, and the consumer will suffer financial loss, inconvenience, or other disadvantages if the term is enforced.
Yes, consumers who have suffered loss or damage due to misleading conduct can claim monetary compensation for breaches of Chapter 2 of the Australian Consumer Law (ACL).
Consumers are entitled to receive goods of acceptable quality, fit for the purpose for which they are bought, and matching the description, sample, or demonstration model provided. Consumers also have the right to cancel certain agreements within a specific time period, and to receive an itemised bill and receipt for purchases over a certain amount.
