Unconscionable conduct is generally understood to mean conduct which is so harsh that it goes against good conscience. Under the Australian Consumer Law, businesses must not engage in unconscionable conduct, when dealing with other businesses or their customers
Unconscionable conduct does not have a precise legal definition as it is a concept that has been developed on a case-by-case basis by courts over time. Nevertheless, unconscionable conduct is generally accepted to mean conduct which should not be done in good conscience. Unconscionable conduct is more than simply unfair or harsh – it must have an element of bad conscience.
Business behaviour may be deemed unconscionable if it is particularly harsh or oppressive, and is beyond hard commercial bargaining.
For example, Australian courts have found transactions or dealings to be 'unconscionable' when they are deliberate, involve serious misconduct or involve conduct which is clearly unfair and unreasonable.
There are a number of factors a court will consider when assessing whether conduct in relation to the selling or supplying of goods and services to a customer, or to the supplying or acquiring of goods or services to or from a business, is unconscionable.
- the relative bargaining strength of the parties
- whether any conditions were imposed on the weaker party that were not reasonably necessary to protect the legitimate interests of the stronger party
- whether the weaker party could understand the documentation used
- the use of undue influence, pressure or unfair tactics by the stronger party
- the requirements of applicable industry codes
- the willingness of the stronger party to negotiate
- the extent to which the parties acted in good faith.
This is not an exhaustive list and it should be noted that the court may also consider any other factor it thinks relevant.
The following practical tips may assist businesses to avoid becoming a victim of unconscionable conduct:
- ensure all commercial agreements are in writing
- make sure you fully understand all the terms of the transaction
- do not sign any agreements without reading them carefully
- ask for plain language explanations and obtain independent professional legal or financial advice if unsure
- if you think you are being treated differently, ask why
- do not allow yourself to be talked into a deal that is wrong for you by high pressure sales tactics. Be wary of tight decision deadlines
- look for the best deal and try to negotiate the outcome you want
- be prepared to walk away from a deal that does not ‘feel’ right. It could be an unreasonable or oppressive deal.
The following practical tips may assist businesses to avoid engaging in unconscionable conduct:
- do not exploit the other party when negotiating the terms of an agreement or contract
- take care to be reasonable when exercising your rights under a contract
- consider the characteristics and vulnerabilities of your customers. For example, use plain English when dealing with customers from a non-English speaking background
- make sure your contracts are thorough, easy to understand, not too lengthy and do not include harsh, unfair or oppressive terms
- ensure you have clearly disclosed important or unusual terms or conditions of an agreement
- ensure customers understand the terms of any agreement associated with the transaction and give them the opportunity to consider the offer properly. If the contract is long, you may decide to provide a summary of the key terms
- observe any cooling-off periods that may apply or consider offering a cooling-off period
- give customers the opportunity to seek advice about the contract before they sign it
- if things go wrong, be open to resolving complaints
- do not reward your staff for unfair, pressure-based selling.
If the court determines that unconscionable conduct has occurred, a variety of remedies may be ordered including:
- compensation for loss or damage
- financial penalties
- having the contract declared void in whole or in part
- having the contract or arrangement varied
- a refund or performance of specified services.