Consumers and Contracts

Australian Consumer Law

Introduction

The Australian Consumer Law (ACL) is Schedule 2 of the Competition and Consumer Act 2010 (Cth) (CCA) (formerly the Trade Practices Act (TPA)) and has been adopted in all States and Territories. See, for example, the Fair Trading (Australian Consumer Law) Act 2010 (ACT) s 7. Some parts of the ACL came into effect on July 1 2010 and the rest, including State and Territory adoption, came into effect on 1 January 2011. The name of the TPA was changed on 1 January 2011 to Competition and Consumer Act 2010.

In this chapter we have already seen that the ACL covers:

• misleading and unconscionable conduct (briefly treated under Excuses) ; and
• consumer guarantees (see Consumer Guarantees), covering both poor quality goods and services and dangerous goods.

In this section, the ACL misleading and unconscionable conduct provisions are examined more closely. Other consumer protection measures in the ACL are then examined.

Note that the Australian Securities and Investments Commission Act 2001 (Cth) prohibits misleading or deceptive conduct, unconscionable conduct and false representations in relation to the supply of financial services. The ACL expressly excludes its application to financial services (CCA s 131A). "Financial services" are very elaborately defined in the Australian Securities and Investments Commission Act 2001 (Cth) ss 12BAA and 12BAB. Broadly they cover the provision of investment and financial products, including risk management.

Misleading or Deceptive Conduct

The ACL s 18(1) (formerly TPA s 52(1)) provides that "A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." In addition to applying to persons generally, this section applies as a Commonwealth law to the conduct of corporations (CCA s 131).

The section merely imposes a standard on the market place. Remedies for misleading conduct are found elsewhere in the legislation and include damages, injunction, rescission of contract and other measures. These are discussed below (see Remedies).

This section has had a profound effect on Australian commerce. It has generated a vast case law. For a detailed treatment see Seddon and Ellinghaus, paras 11.102-11.136.

Although s 18 appears in the Australian Consumer Law, the section is not limited to consumer transactions or dealings. Many of the cases on misleading conduct are business-to-business cases.

In addition it is a very useful law for consumers to use when an over-enthusiastic sales person has persuaded the consumer to buy with statements that turn out not to be correct. The remedies available for misleading conduct (see Remedies below) are in addition to, and independent of, the remedies available for breach of consumer guarantees discussed above at What remedies are available?.

The concepts of misleading or deceptive conduct have been taken at face value by the courts. "Deceptive" requires an intention to deceive (fraud) and so is of little relevance because proving fraud is difficult. But "misleading" requires no intention or particular state of mind. In fact the prohibition of misleading conduct imposes a strict liability not to lead another into error in commercial and consumer dealings. Case law has established that an innocent (non-fraudulent and non-negligent) statement may generate liability.

It is also possible to be liable for what was not said if the failure to speak up was in context misleading. This usually arises when a person has made a statement but fails to qualify it sufficiently.

The impact of s 18 (and its former manifestation TPA s 52) has been very wide. False advertising is caught by this legislation and it is possible for anyone to put a stop to a misleading advertisement, but this is usually left to the ACCC or sometimes a rival trader. This treatment focuses on the contract-related effect of the legislation, that is, usually misleading conduct in the lead-up to a contract or during the running of the contract.

The courts have been wary about allowing statutory misleading conduct in effect to displace the law of contract. Consequently it has been held that making a promise and then later not keeping it is not misleading conduct unless the promise was not genuinely made in the first place (that is, it was fraudulent which is difficult to prove). Even so, some types of promises, for example about the performance or capability of a product, have generated liability under this legislation.

Who is bound?

A. Corporations and persons

The ACL applies generally to persons but also applies to corporations under CCA s 131.

B. Government bodies

The ACL binds each government only "in so far as it carries on a business" (CCA s 2A; Fair Trading Act 1992 (ACT) s 15). Case law has shown that governments do not carry on a business in respect of almost all of their commercial activities (that is, principally procurement). The result is that each government is very substantially exempt from the ACL.

In trade or commerce

The allegedly misleading conduct must occur in trade or commerce. This has been interpreted very broadly by the courts and covers any kind of commercial activity, including the dealings before a contract is made. It is easier to state where the legislation does not apply than to discuss the huge number of case where it does apply. It does not apply to

• private, one-off sales, for example, the sale of a car after having advertised it in The Canberra Times;
• internal communications within an organisation, such as a company or government department;
• regulatory activity by government bodies;
• provision of information by government in a non-commercial context, for example, information about pension rights; or
• political statements.

The conduct of tenders by government is in trade or commerce as are ordinary procurement activities but governments are immune unless they are carrying on a business. Procurement is not carrying on a business - see Who is bound?.

Strict liability

Mention has been made already of the strict liability imposed as a result of the word "misleading" (but not "deceptive" which requires a guilty mind). This is one of the most remarkable things about the legislation. It is not to the point for a person accused of misleading conduct to say that he or she did not know that the information was incorrect or that he or she took all due care when preparing the information. The only question is: was it misleading? Did it lead the other party into error? An innocent person can be found to have engaged in misleading conduct.

The strict liability principle in relation to misleading conduct has two possible exceptions:

1. If the misleading conduct consists of making a statement about the future, the person making the statement can defend by proving that he or she had reasonable grounds for believing that the prediction was correct (ACL s 4);

2. A person who acts as a "mere conduit" for information that turns out to be incorrect can defend an action based on misleading conduct. It must be clear that the provider of the information is not in any way responsible for it and is just passing it on for what it is worth. See Seddon and Ellinghaus, para 11.121.

Remedies

The remedies available under the legislation are much more generous than under the law of contract. A person complaining of misleading conduct may

• seek compensatory damages (ACL s 236);
• seek an injunction (principally applicable to advertising cases) (ACL ss 232-235); or
• seek various other remedies (a long list of options available to a court, including rescission of contract in whole or in part, modification of a contract and "such order or orders as(the court thinks appropriate") (ACL ss 237 and 243).
• It is not possible to claim damages in respect of misleading or deceptive conduct if the person misled suffered personal injuries or death (CCA ss 137C, 137D and 137E). This measure was introduced in the wake of the so-called insurance crisis after the collapse of HIH. There is no such limitation under the Fair Trading Act 1992 (ACT).

Contributory fault

If the person complaining of misleading conduct was in part to blame for the loss or damage suffered then, under the Commonwealth CCA, damages can be reduced (CCA s 137B). Note that this section is not in the ACL itself and so State or Territory adoption of the ACL does not adopt this provision. The State and Territory Fair Trading Acts have no such provision which means, according to High Court authority, that a person who engaged in misleading conduct must bear the full loss even though the misled party was partly to blame for some of the loss suffered: I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002). The misled party should sue under the State or Territory Fair Trading Act if there is a chance that damages could be reduced. However, if the defendant is a corporation, it is bound by the Commonwealth CCA and so reduction of damages for contributory fault can apply.

No exclusion

It is not possible to draft a clause in a contract that effectively removes potential liability for misleading conduct. There have been many attempts and almost universal failure. This is not because there is any section in the legislation which prohibits contracting out, as is common in other legislation discussed in this chapter. Instead, the courts take the view that parliament has set a standard of conduct by legislation and it is not possible to contract out of that. So long as a person has been misled in trade or commerce, no contractual device can remove this fact. This applies no matter what form the clause takes.

However, it is possible to qualify the information so as to make it not misleading if it turns out to be wrong. The High Court in Butcher v Lachlan Elder Realty Pty Ltd (2004) held that an inaccurate survey diagram, included in a real estate agent's brochure for an expensive house, was not misleading because of a disclaimer in the brochure that stated that information provided may not be accurate and that potential buyers should check for themselves. Note that this was a disclaimer in the brochure which contained the misleading information. It is still true after this decision that an exclusion clause buried in the fine print of the contract will not be effective.

Time limit

An action based on misleading conduct must be brought within 6 years of the accrual of the cause of action (ACL ss 236(2) and 237(3)).

Unconscionable Conduct

We have seen that the general law recognises a concept of unconscionable conduct, particularly in connection with negotiations prior to a contract (see Undue influence and unconscionability). The remedy for the victim of unconscionable conduct under the general law is rescission of the contract which, as described above, is a somewhat limited remedy.

Unconscionable conduct is also the subject of provisions in the ACL.

There are three different types of unconscionable conduct under the ACL:

1. unconscionable conduct under the "unwritten law" (ACL s 20);

2. unconscionable conduct affecting consumers (ACL s 21); and

3. unconscionable conduct affecting small business (ACL s 22).

Unconscionable conduct under the unwritten law

Section 20 of the ACL states that a person (which includes a corporation) must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law from time to time. The purpose of this section is principally to widen the range of remedies available to the victim of unconscionable dealing. It also enables the ACCC to investigate unconscionable conduct and, if necessary, bring legal action on behalf of the person who has been treated unconscionably.

The remedies described above for misleading conduct are equally available for unconscionable conduct.

Section 20 appears to refer to the doctrine of unconscionable dealing (particularly the Amadio case discussed under Undue Influence and unconscionability) as it has been interpreted in case law. However, the words are perfectly general and the courts have not yet settled on what constitutes unconscionable conduct under 'the unwritten law' and it may go beyond the doctrine of unconscionable dealing to include other equitable doctrines (for example, equitable estoppel).

Unconscionable conduct affecting consumers

The ACL s 21 provides that a person (which includes a corporation) must not, in trade or commerce, in connection with the supply, or possible supply of goods or services to a person, engage in conduct that is, in all the circumstances, unconscionable.

This provision protects "persons" but the general definition of "consumer" in s 3, discussed above in Who is a consumer?, in connection with consumer guarantees does not apply. Instead the protection provided by s 21 is only available in respect of goods or services "of a kind ordinarily acquired for personal, domestic or household use or consumption" (ACL s 21(5)). The significance of this is that the $40,000 limit does not apply. The effect of that limit was that business purchases under $40,000 were deemed to be consumer purchases. Under s 21 there is no monetary limit but the goods or services must be of a kind ordinarily acquired for personal, domestic or household use or consumption. This would cover some business purchases (for example a microwave for the staff kitchen). Other business purchases or sales are covered by s 22 (discussed below).

Considerations to be taken into account

Section 21(2) of the ACL provides some guidance as to what amounts to unconscionable conduct. In other words, the meaning of unconscionable conduct is not left to the general law (as in s 20). The subsection lists a number of considerations to which the court may have regard. In brief, they are:

a) the respective bargaining strengths of the parties;

b) whether the consumer was required to comply with conditions not reasonably necessary for the protection of the other party;

c) whether the consumer understood documents relating to the transaction;

d) whether any undue influence or unfair tactics were used against the consumer; and

e) the price and circumstances under which the consumer could have acquired the goods or services from a third party.

These factors are only a guide and the list is not exhaustive. Conduct may be considered to be unconscionable where there has been serious misconduct or unfairness.

Unconscionability requires that the party alleged to have acted unconscionably was aware of the other party's vulnerability and then took advantage of that vulnerability by proceeding with a transaction. How does this apply to a corporation whose various employees may be dealing with a customer? In ACCC v Radio Rentals Ltd (2005) it was held that it is not possible to aggregate the dealings of various employees of a corporation which together could be seen as exploitative but where each employee was unaware of the disability of the customer and had no reason to know of it. In other words, it is not possible to build a case of unconscionable conduct against a corporation by notionally aggregating the states of mind of its various employees.

As with misleading or deceptive conduct, the prohibition applies to any conduct, not just conduct at the time of entering into a contract.

A clause in a contract can also be declared unconscionable, even if there was no unconscionable conduct in the way the contract was signed. For example, in George T Collings v HF Stevenson (Aust.) Pty Ltd (1991), the court held that a clause in the fine print of a contract that created an onerous obligation was unconscionable.

However, the majority of the case law to date has dealt with procedural unfairness, that is, in relation to matters leading up to the formation of a contract, rather than with the substantive unfairness of a contract itself.

Unconscionable conduct affecting small business

ACL s 22 prohibits misleading conduct affecting small business. This is not, however, apparent from the section itself which makes no mention of small business. Section 22 provides:

(1) A person must not, in trade or commerce, in connection with:

(a) the supply or possible supply of goods or services to another person (other than a listed public company); or

(b) the acquisition or possible acquisition of goods or services from another person (other than a listed public company);

engage in conduct that is, in all the circumstances, unconscionable.

At the time when this section (formerly s 51AC of the TPA) was introduced into parliament, it was said that it was designed to protect small business, such as franchisees or small shopkeepers in large shopping malls when dealing with big business. This is done somewhat crudely by limiting the "victims" of unconscionable conduct: they must not be listed public companies. Other than that, there is no guidance as to its intended application to small business transactions.

Subsections 22(2) and (3), like s 21(2), include a list of factors that may amount to unconscionable conduct where the small business is either a consumer or a supplier of goods or services. The list is somewhat more extensive than that in s 21. In addition to the factors listed above in connection with s 21, s 22 includes:

the extent to which the supplier's conduct towards the business consumer was consistent with the supplier's conduct in similar transactions between the supplier and other like business consumers;

the requirements of any applicable industry code (for example, the code applying to franchise contracts);

the extent to which the supplier unreasonably failed to disclose to the business consumer:

(i) any intended conduct of the supplier that might affect the interests of the business consumer; and

(ii) any risks to the business consumer arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the business consumer);

the extent to which the supplier was willing to negotiate the terms and conditions of any contract for supply of the goods or services with the business consumer;

whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the business consumer for the supply of the goods or services; and

the extent to which the supplier and the business consumer acted in good faith.

As with s 21, these factors are merely guides and are not definitive of what amounts to unconscionable conduct.

Time limit

An action based on unconscionable conduct must be brought within 6 years of the accrual of the cause of action (ACL ss 236(2) and 237(3)).

Unfair Contract Terms

The ACL includes a new unfair contract terms part (Part 2-3) under which the terms of standard form contracts can be challenged as unfair. This came into effect on July 1 2010 in the first tranche of the ACL. A successful challenge results in the term being declared void. In addition, if a court declares a term or terms to be unfair under s 250, additional remedies are available for a consumer who has suffered loss as a result of the declared term being used.

It will be seen below that the path to making a successful challenge to a contract term involves multiple concepts. If one of these is not established, then the challenge will fail. It will accordingly be very difficult for an individual to mount a successful case, particularly as the other side will probably be a well-advised corporation. This part of the ACL is not consumer friendly and would usually require the assistance of lawyers.

What contracts are affected by unfair contract terms?

Part 2-3 applies to consumer standard form contracts as defined (see below) and is only available to individuals (that is, a company could not mount a challenge).

The ACL unfair contract terms regime does not apply to:

a term that defines the main subject-matter of the contract (ACL s 26(1)(a));

a term that sets the upfront price of the goods or services being purchased (ACL s 26(1)(b));

a contract of marine salvage or towage (ACL s 28(1)(a));

a charterparty of a ship (ACL s 28(1)(b));

a contract of carriage of goods by ship (ACL s 28(1)(c);

a constitution of a corporate body (ACL s 28(3));

insurance contracts governed by the Insurance Contracts Act 1984 (Cth) (Insurance Contracts Act 1984 s 15); or

contracts for financial services or products (CCA s 131A(2)(b)).

Standard form consumer contracts

Part 2-3 applies to consumer contracts which are standard form contracts (ACL s 23(1)), A consumer contract is a contract:

• where the consumer is an individual; and
• goods, services or an interest in land are acquired wholly or predominantly for personal, domestic or household use or consumption.

Note the different test here from that used in connection with consumer guarantees (see Who is a consumer?).

The test here does not include a $40,000 threshold and is based on actual use rather than goods, etc of a kind that are used for domestic or household purposes.

A contract is presumed to be a standard form contract unless the supplier adduces evidence to the contrary (ACL s 27(1)). If a court has to decide whether a contract is a standard form contract, it must consider (s 27(2)):

• whether one of the parties has all or most of the bargaining power relating to the transaction;
• whether the contract was prepared by one party before any discussion relating to the transaction occurred between the parties;
• whether another party was, in effect, required either to accept or reject the terms of the contract in the form in which they were presented;
• whether another party was given an effective opportunity to negotiate the terms of the contract;
• whether the terms of the contract (other than the terms referred to in s 26(1)) take into account the specific characteristics of another party or the particular transaction.

Meaning of "unfair"

A term of a standard form consumer contract is unfair (s 24(1)) if:

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

It is presumed that a term is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term unless that party proves otherwise (ACL s 24(4)).

In deciding whether a term is unfair a court may consider any matters that are relevant but must take into account (s 24(2)):

• the extent to which the term is transparent; and
• the contract as a whole.

The test of whether a term is transparent (s 24(3)) is whether the term is:

• expressed in reasonably plain language; and
• legible; and
• presented clearly; and
• readily available to any party affected by the term.

In addition to these criteria there is a "grey list" that is similar in purpose to the lists of what could constitute unconscionable conduct under ss 21 and 22, that is, the examples are guides but not definitive of what would be held to be unfair.

Remedies

If a court decides that a term is unfair the term is void (s 23(1)). So far as possible the rest of the contract should continue to operate (s 23(2)).

Voidness is the only result of a successful challenge to a term of a standard form contract. There is no right to damages or other remedies following a challenge.

It is possible for a court to make a declaration that a particular term of a standard from agreement is unfair under s 250. Presumably this would usually only be done at the behest of a regulatory body such as the ACCC. Once a s 250 declaration has been made, further remedies are available. On application by a person who has suffered loss or damage or on the application of the regulator, a court can grant an injunction (s 232(3)) or make such orders as the court thinks fit (s 237(1)) and can, on application by the regulator, also make orders in favour of non-party consumers who have been affected by the declared unfair term (s 239).

Other Misleading or False Representation Provisions in the Australian Consumer Law

In addition to the general prohibitions of misleading or deceptive conduct and unconscionable conduct, the ACL also includes a number of provisions that deal with various misleading or false representations or other unacceptable practices in specific circumstances. All of these provide both civil remedies for breaches and constitute offences under Part 4-1 of the ACL. They are:

• various false representations in connection with the supply or promotion of goods or services (s 29)) including making a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (which includes consumer guarantees under the ACL) (s 29(1)(m)) or trying to persuade someone to buy an extended warranty when sufficient protection is already provided under the legislation (s 29(1)(n) - see discussion of The 12-month warranty and extended warranties above);
• false representation, misleading or offensive conduct in relation to land (s 30);
• misleading conduct in relation to employment (s 31);
• falsely offering gifts and prizes (s 32);
• misleading conduct as to the nature, manufacturing process, characteristics, suitability for purpose or quantity of goods (s 33);
• misleading conduct in relation to services (s 34);
• prohibition of bait advertising (s 35);
• prohibition of accepting payment without intending or being able to supply goods or services as ordered (s 36);
• misrepresentation about home-operated businesses (s 37).

A business that engages in any of these practices can, in addition to being liable to civil remedies such as damages, rescission of contract, and so on, be prosecuted under ACL Part 4-1, whereas engaging in misleading conduct or unconscionable conduct (ss 18-22) only attracts civil remedies for parties adversely affected.

Unsolicited Supplies

There are also provisions dealing with unsolicited supplies. They provide for:

• prohibition of sending unsolicited credit or debit cards (s 39);
• prohibition on asserting a right to payment for unsolicited goods or services or for making an entry in a directory (ss 40 and 43);
• regulation of the rights of recipients of unsolicited goods (s 41) or services (s 42);

Pyramid Selling

The ACL s 44 prohibits a person from participation in, or inducing another to participate in, a pyramid selling scheme. These provisions are quite detailed because it is necessary to differentiate between legitimate promotional schemes and prohibited pyramid selling.

A pyramid selling scheme is defined as a scheme with both the following characteristics:

(a) to take part in the scheme, some or all new participants must make a payment (a participation payment ) to another participant or participants in the scheme; and

(b) the participation payments are entirely or substantially induced by the prospect held out to new participants that they will be entitled to a payment (a recruitment payment) in relation to the introduction to the scheme of further new participants.

Pricing

The Australian Consumer Law deals with various pricing practices. It is prohibited for a person to display multiple prices for goods and not be prepared to sell for the lowest displayed price (s 47). It is also required that a single price be displayed in certain circumstances (s 48).

Other unfair practices

Referral selling

Referral selling is prohibited under s 49. Referral selling is where a customer is told that he or she will receive a rebate, commission or other benefit in return for:

(a) giving the person the names of prospective customers; or

(b) otherwise assisting the person to supply goods or services to other consumers

if receipt of the rebate, commission or other benefit is contingent on an event occurring after that contract is made.

Harassment and coercion

Under ACL s 50, a person must not use physical force, or undue harassment or coercion, in connection with:

(a) the supply or possible supply of goods or services; or

(b) the payment for goods or services; or

(c) the sale or grant, or the possible sale or grant, of an interest in land; or

(d) the payment for an interest in land.

Unsolicited Consumer Agreements (Door-to-Door Sales and Similar Practices)

Elaborate provisions of the Australian Consumer Law (Part 3-2 Division 2) regulate the practice of door-to-door or telephone selling called an "unsolicited consumer agreement". These provisions cannot be modified or excluded by contract (s 89) nor is a consumer competent to waive rights provided by this legislation (s 90). Breaches of these provisions constitute offences under ACL Part 4-2 Division 2.

The legislation deals with the possibility that either the consumer or the supplier may assign its rights under an unsolicited consumer agreement in which case the agreement can be enforced by, or against, the assignee (s 91). If goods or services are bought for a third party then that third party has the same rights as the original purchaser (s92).

Definition of unsolicited consumer agreement

An agreement is an unsolicited consumer agreement (s 69) if:

(a) it is for the supply, in trade or commerce, of goods or services to a consumer (that is, as defined for the purpose of consumer guarantees see Who is a consumer?; and

(b) it is made as a result of negotiations between a dealer and the consumer:

(i) in each other's presence at a place other than the business or trade premises of the supplier of the goods or services; or

(ii) by telephone;

whether or not they are the only negotiations that precede the making of the agreement; and

(c) the consumer did not invite the dealer to come to that place, or to make a telephone call, for the purposes of entering into negotiations relating to the supply of those goods or services (whether or not the consumer made such an invitation in relation to a different supply); and

(d) the total price paid or payable by the consumer under the agreement:

(i) is not ascertainable at the time the agreement is made; or

(ii) if it is ascertainable at that time - is more than $100 or such other amount prescribed by the regulations.

"Dealer" is defined in s 71 to mean a person who either enters into negotiations or telephones for the purpose of making a sale. There is a presumption under s 70 that the agreement is an unsolicited consumer agreement if one party asserts that it is and the other party does not prove otherwise.

Negotiating an unsolicited consumer agreement

Sections 73-77 specify certain requirements for the negotiating process.

A dealer must not without prior agreement call on a person to negotiate an unsolicited consumer agreement on Sundays or public holidays or before 9.00am or after 6.00pm (5.00 pm on Saturdays) on other days (s 73);

The dealer must disclose his or her purpose, tell the customer that the dealer will leave on request and provide any prescribed details about the dealer specified in the Regulations (s 74);

The dealer must leave the premises on request by the customer and must not attempt to contact the customer in the next 30 days (s 75);

The dealer must tell the customer about the cooling off period (see Terminating unsolicited consumer agreements ("cooling off period")) before any sale is made and this must be confirmed in writing (whether negotiations are face to face or by telephone) (s 76). The form of writing may be the subject of prescription by Regulation.

If a dealer acting for the potential supplier other than the dealer breaches these requirements, the supplier is also in breach (s 77).

Requirements for unsolicited consumer agreements

Section 78-81 set out the requirements for securing the sale.

The dealer must provide a copy of the signed written agreement to the customer immediately with a face-to-face sale and within 5 business days (or such longer period as has been agreed) in the case of a telephone agreement. The agreement can be delivered by post, personally or by email if the customer has consented (s 78).

Section 79 provides that the agreement itself:

(a) must set out in full all the terms of the agreement, including:

(i) the total consideration to be paid or provided by the consumer under the agreement or, if the total consideration is not ascertainable at the time the agreement is made, the way in which it is to be calculated; and

(ii) any postal or delivery charges to be paid by the consumer;

(b) its front page must include a notice that:

(i) conspicuously and prominently informs the consumer of the consumer's right to terminate the agreement; and

(ii) conspicuously and prominently sets out any other information prescribed by the regulations; and

(iii) complies with any other requirements prescribed by the regulations;

(c) it must be accompanied by a notice that:

(i) may be used by the consumer to terminate the agreement; and

(ii) complies with any requirements prescribed by the regulations;

(d) it must conspicuously and prominently set out in full:

(i) the supplier's name; and

(ii) if the supplier has an ABN: the supplier's ABN; and

(iii) if the supplier does not have an ABN but has an ACN: the supplier's ACN; and

(iv) the supplier's business address (not being a post box) or, if the supplier does not have a business address, the supplier's residential address; and

(v) if the supplier has an email address: the supplier's email address; and

(vi) if the supplier has a fax number: the supplier's fax number;

(e) it must be printed clearly or typewritten (apart from any amendments to the printed or typewritten form, which may be handwritten);

(f) it must be transparent.

Section 80 provides that if the dealer is acting for a supplier in a fact-to-face sale then the dealer's details must be given to the customer.

Any amendments to the written document must be signed by both parties (s 81).

Terminating unsolicited consumer agreements ("cooling off period")

The customer has the right under s 82 to terminate, verbally or in writing (no formalities are specified), for no reason (often called a "cooling off period"). The time within which this right may be exercised varies but in the ordinary case it is 10 business days from signing in the case of a face-to-face sale or 10 business days from delivery of the written agreement in the case of a telephone sale.

The cooling off period is 3 months if the dealer has contravened s 73 (permitted hours for negotiating an unsolicited consumer agreement), s 74 (disclosing purpose and identity) or s 75 (ceasing to negotiate on request).

The cooling off period is 6 months if the dealer has contravened s 76 (informing consumer of termination period), any of the requirements set out in Requirements for unsolicited consumer agreements above or s 86 (prohibition on supplying for 10 business days).

The effect of termination is that the contract is taken to have been rescinded by mutual consent and any "related contract or instrument" is void (s 83). A "related contract or instrument" includes a guarantee, indemnity or mortgage/charge taken by the supplier but does not include a tied continuing credit contract or linked credit provider arrangement within the meaning of ss 127(2) or (3) of the Schedule to the National Consumer Credit Protection Act 2009).

The customer can terminate even if the goods or services have been partly or wholly consumed or used (s 83(3)(b)). This is justified by the prohibition in s 86 on supplying the goods or services or receiving payment for them for 10 business days after contract signing or delivery in the case of a telephone contract. In other words there is a cooling off period on performance of the contract as well.

Once termination is effected, the supplier must refund any money paid (ss 84 and 87) and the customer must return any goods not consumed or notify the supplier where they can be collected (s 85). If the supplier fails to collect them within 30 days the goods become the property of the consumer. The customer may be liable to compensate the supplier for damage to goods due to lack of care by the customer but not for fair wear and tear. The customer may also be liable to pay for any service delivered after the 10-day cooling off period.

The supplier must not attempt to enforce a terminated contract nor provide the customer's name as a defaulter or debtor to a credit agency (s 88).

Lay-by Agreements

Lay-by agreements are regulated under Part 3-2 Division 3 of the ACL. Breaches of these provisions constitute offences under ACL Part 4-2 Division 3.

What is a lay-by agreement?

A lay-by agreement is an agreement between a supplier of consumer goods and a consumer for the supply, in trade or commerce, of the consumer goods on terms (whether express or implied) which provide that:

(a) the goods will not be delivered to the consumer until the total price of the goods has been paid; and

(b) the price of the goods is to be paid by:

(i) 3 or more instalments; or

(ii) if the agreement specifies that it is a lay-by agreement-2 or more instalments.

Both "consumer goods" and "consumer" are defined in s 2. "Consumer" is the same definition as for consumer guarantees (see Who is a consumer? and "consumer goods" are defined to mean goods that are intended to be used, or are of a kind likely to be used, for personal, domestic or household use or consumption.

The seller's obligations

The seller must provide a written copy of the agreement to the customer and must ensure that the agreement is transparent (s 96(1)and (2)). Any deposit paid by the consumer must be treated as an instalment (s 96(4)).

Consumer's right to terminate

The consumer may terminate the lay-by agreement at any time before delivery of the goods (s 97). The supplier can charge a termination charge if the consumer terminates so long as the supplier was not in breach, the agreement provided for the termination charge and the charge reflected the reasonable costs to the supplier of the consumer terminating the agreement. The supplier must otherwise return all payments (s 99).

Supplier's right to terminate

If the consumer is in breach of the agreement the supplier can terminate it in which case the payments made by the consumer must be returned (ss 98 and 99). It appears that the supplier cannot charge a termination charge in this circumstance because s 97(2) only allows a termination charge if the consumer terminates the agreement.

The supplier can also terminate if the supplier ceases business or the goods the subject of the agreement are no longer available.