A recent case serves as a warning of the dangers in the use of standard form contracts when you use “opt out” provisions, and is an important reminder for anyone who has clients on subscription services to check their terms to ensure they aren’t infringing the rules.
Chrisco has been ordered by the Federal Court to pay $200,000 for its breach of the Australian Consumer Laws relating to terms in its contracts deemed to be “unfair” and statements made that were deemed “misleading”.
Chrisco sells Christmas hampers, and is widely advertised on television, internet and printed catalogues, including to regional areas of Australia and remote indigenous communities.
Chrisco had clauses in its agreement that allowed it to continue to take payments by direct debit, with further payments applying to the following year’s order, even after the customer had fully paid for their goods purchased by lay-by. To stop the further payments customers had to “opt out” of the automatic deductions from their accounts. Chrisco also told its customers that they could not cancel a lay-by agreement after making their final payment.
Justice Edelman considered that the contract resulted in a significant imbalance in the rights and obligations between Chrisco and its customers.
Sarah Court, the ACCC Commissioner said “The Court’s findings send a strong message to traders that they must comply with all of their obligations under the Australian Consumer Law, including the unfair contract terms laws that are in place to protect consumers from unfair terms in standard form consumer contracts”.
The matter will be set down for a penalty hearing in the future. The ACCC is seeking pecuniary penalties, declarations, injunctions and costs.
If you provide your customers with a standard form contract, it is important to ensure that your terms do not breach the Australian Consumer Laws. Look out for terms that cause significant imbalance, such as automatic rollover clauses, early termination fees or forfeiture clauses. It is also important to ensure that terms of your standard form contract are transparent, that is, that the terms are expressed in plain language, legible, clear, easy to read and readily available.
If you think you may possibly have unfair terms that might be exposing your business, contact us to book in a time for a free discussion about how we can help to ensure you are compliant with the Australian Consumer Law.
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