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Unconscionable conduct

The ACL prohibits 'unconscionable' conduct, or conduct that is so unreasonable it defies good conscience. The ACL does not define unconscionable conduct, but the courts have found transactions to be unconscionable when they are deliberate, involve serious misconduct or contain an element that is clearly unfair and unreasonable.

Generally, to be considered unconscionable, conduct must be more than simply unfair – it must be against conscience as judged against the norms of society. What is considered unconscionable conduct depends on the circumstances.

Examples include:

  • not properly explaining the conditions of a contract to a person who the supplier knows does not speak English or has a learning disability
  • not allowing sufficient time to read an agreement, ask questions or get advice
  • putting undue influence or pressure on the person, such as refusing to take 'no' for an answer
  • using a friend or relative of the customer to influence the customer's decision
  • taking advantage of a low-income consumer by making false statements about the real cost of a loan
  • failing to disclose important or unusual terms in a contract
  • not honouring a cooling-off period.

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.

These include:

  • 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.

Case studies:

  1. Vacuum salespeople called upon the homes of elderly people under the premise of conducting a free vacuum cleaner maintenance check, but once inside the homes engaged in unfair and pressure sales techniques to induce them to purchase a new vacuum cleaner. The court found that the conduct was unconscionable, and that consumers must be dealt with honestly, fairly and without deception and unfair pressure.
    See: ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90
     
  2. Craftmatic was found to have used misleading and unfair sales tactics to sell beds to elderly people during the course of home presentations. Craftmatic's sales and promotional materials were designed, scripted and conducted to unduly influence potential customers and to create and take advantage of an unequal bargaining position and, as a result, its conduct was unconscionable.
    See: ACCC v Craftmatic Australia Pty Ltd [2009] FCA 972