Unfair Contractual Terms - Getting Past the Fine Print

As a general rule, the law presumes that a person who has signed a contract has read the contract. This is often called the “incorporation of terms by signature”. In most normal commercial situations, the terms of the contract become binding upon signature. This situation had significant potential for exploitation, particularly with the employment of “fine print” and other methods to hide or bury the true nature of contractual obligations.

As we set out in our previous article, a term of a contract may be found unfair (under the ACL) if:

• The term causes a significant imbalance in the parties' rights and obligations arising from the contract;
  
  
• It is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by it; and
  
  
• It would cause detriment (financial or otherwise) to a party if it were applied.

In addition, the Court will consider the ‘transparency’ of the term. That is, the contractual term needs to be “expressed in reasonably plain language” and “readily available to any party affected by the term.”

When attempting to determine whether a contractual term might not be ‘transparent’, consider the following questions:

• Does the term use plain and sufficiently clear English?

• Where a term creates important rights or obligations, is that term given a prominent place in the document? Consider whether the term is part of a specific, named section, or whether the contract uses a different font in order to draw the readers’ attention to that term, etc.
  
  
• Has the term creating the obligation been placed in a separate annexure/schedule to the contract?
  
  
• When entering into the contract, did the parties sign an acknowledgement that they had read the whole contract?
  
  
• Is the term written in fine print?

Even if the Court considers all the factors and finds that a term is transparent, this does not mean that the Court will determine that the term was fair. That being said, should the Court find that term is not transparent, that term becomes voidable and can be severed from the rest of the contract. The unfair contractual terms provisions of the Australian Consumer Law have very real implications for small businesses and private individuals entering into contracts.

If you have further questions, please contact us at frank@franklaw.com.au.

This is not legal advice.