The Australian Consumer Law (ACL) sets out a number of rights and responsibilities for businesses in their day to day dealings with consumers and other businesses, including a prohibition against unconscionable conduct.
What is unconscionable conduct?
Unconscionable conduct can be a difficult concept to understand. Certain conduct may be unconscionable if it is particularly harsh or oppressive. It may also be unconscionable where one party knowingly exploits the special disadvantage of another. It needs to be more than just hard commercial bargaining; it means doing what should not be done in good conscience.
Principles
The ACL sets out principles to assist businesses and consumers in understanding what unconscionable conduct is. These principles may also assist the courts in deciding whether conduct was unconscionable. The principles are:
Unconscionable conduct under the ACL is not limited by historical judge-made law. Importantly, it is not necessary to show that the weaker party suffered from a special disadvantage or disability that the stronger party took advantage of
A system of conduct or pattern of behaviour may be unconscionable even if the party complaining of it suffered no loss or damage or where no individual ‘victim’ is identified
Unconscionable conduct is not limited to situations where there is a contract. However, where there is a contract, the courts can consider not only how the contract was entered into (for example, whether excessive pressure was used in negotiations) but its terms and how – and to what extent – the contract was carried out.
Practical tips to avoid becoming a victim of unconscionable conduct
Ensure all commercial agreements are set out 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, find out why.
Do not allow yourself to be talked into a deal that is wrong for you by high pressure sales tactics. Be wary if you are presented with tight deadlines.
Look for the best deal and attempt 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.
Practical tips 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 consumers. For example, use plain English when dealing with consumers from a non-English speaking background.
Make sure your contracts are comprehensive (without being too lengthy), easy to understand and do not include harsh, unfair or oppressive terms.
Ensure you have clearly disclosed important or unusual terms or conditions of an agreement.
Ensure that the consumer understands the terms of any agreement associated with the transaction and give consumers 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 consumers the opportunity to seek advice about the contract before they sign it.
If things go wrong, be open to resolving complaints and, where appropriate, setting aside contracts or agreements.
Do not reward your staff for unfair, pressure-based selling.
If you think another business has treated you unconscionably
If you believe you have been subjected to unconscionable conduct, contact the ACCC, ASIC or your local consumer protection agency (the ACL regulators). You may also take your own private action by seeking damages for loss suffered or seeking an injunction to prevent an offending party from breaking the law. You may want to seek legal advice prior to taking such action.
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.
In some cases, the ACL regulators may investigate complaints and take action against businesses that have engaged in unconscionable conduct. The ACCC’s decision to take enforcement action is made in accordance with the principle set out in its Compliance and Enforcement Policy.
More information
If any of the issues described above apply to your business situation, contact the ACCC's small business helpline on 1300 302 021.
The ACCC has also produced the Business Snapshot: Unconscionable Conduct publication. The snapshot explains unconscionable conduct using actual examples and provides practical tips for businesses to minimise not only the risk of becoming a victim of unconscionable conduct, but also how to avoid engaging in such conduct towards consumers and other businesses.
