Court declares consumer contract terms unfair

30 July 2013

The Federal Court has declared that a number of clauses in ByteCard Pty. Limited’s (ByteCard) standard form consumer contracts are unfair and therefore void following action by the Australian Competition and Consumer Commission. 

ByteCard (better known as NetSpeed Internet Communications) is an Internet Service Provider that provides internet connectivity, domain registration, hosting and web design.

“This is the first time the ACCC has commenced legal proceedings based exclusively on the new unfair contract terms provisions of the Australian Consumer Law,” ACCC Chairman Rod Sims said.

The Federal Court declared, by consent, that clauses 1.7, 4.1, 4.2 and 6.5 of ByteCard’s standard terms and conditions are unfair contract terms.  The unfair contract terms:

  • enabled ByteCard to unilaterally vary the price under an existing contract without providing the customer with a right to terminate the contract;
  • required the consumer to indemnify ByteCard in any circumstance, even where the contract has not been breached and the liability, loss or damage may have been caused by ByteCard’s breach of the contract; and
  • enabled ByteCard to unilaterally terminate the contract at any time with or without cause or reason.

The terms were considered unfair as they:

  • created a significant imbalance in the parties’ rights and obligations;
  • were not reasonably necessary to protect ByteCard’s legitimate interests; and
  • if applied or relied upon by ByteCard, would cause detriment to a customer.

ByteCard has also been ordered to pay a contribution to the ACCC’s costs. 

“This is a positive outcome for consumers and acts as a warning to businesses. The ACCC won’t hesitate to take action against businesses who continue to include unfair terms in their standard form consumer contracts,” Mr Sims said.

“The Court’s declarations in this matter is a timely reminder for all businesses to review their consumer contracts to ensure that potential unfair contract terms are removed or amended.”

This matter was brought to the ACCC’s attention by the Australian Communications Consumer Action Network.

In March, the ACCC released the report Unfair Contract Terms Industry Review Outcomes, which identified a number of problematic terms in standard form consumer contracts. 

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