The Federal Court has declared that a number of terms in Europcar Australia’s 2013 standard rental agreement to be unfair, and therefore void, in proceedings brought by the Australian Competition and Consumer Commission. Europcar was also ordered to pay a penalty of $100,000 for making false or misleading representations about consumers’ liability in the event of vehicle damage.
The Court found that various terms in Europcar’s standard rental agreement were unfair because they held consumers liable for vehicle loss or damage regardless of whether the consumer was at fault. Other terms were also found to be unfair because consumers were liable for vehicle loss or damage when they breached the rental agreement, no matter how trivial the breach or whether it had any connection to the loss or damage caused.
The Court also found that, from December 2013 to July 2014, Europcar made false or misleading representations on its website that consumers’ liability for vehicle accident damage would be limited to a “Damage Liability Fee” of $3650, or less if the consumer purchased Europcar’s “extra cover” products. In fact, under Europcar’s standard rental agreement, consumers’ liability was not limited to these amounts in cases of overhead, underbody or water damage, even when “extra cover” products were purchased.
“This decision is an important one, as it makes it clear to car rental companies that they cannot simply rely on contractual terms to hold consumers liable for any and all damage that may occur during a rental period, regardless of the circumstances. Terms in standard form rental agreements must be fair,” ACCC Deputy Chair Dr Michael Schaper said.
Europcar has amended its standard rental agreement to remove the unfair terms. The misleading statements have also been removed from Europcar’s website.
In resolving these proceedings, Europcar agreed to facts and joint submissions to be put to the Court and consented to orders for corrective advertising and costs.
This outcome is also part of a wider ACCC review of the vehicle rental industry in Australia. As part of this review, the ACCC has been investigating various consumer issues, including misleading vehicle rental pricing and charging, and unfair contract terms.
Recently, Hertz Australia provided a court enforceable undertaking following an ACCC investigation into Hertz’s rental vehicle damage charging processes. The ACCC is continuing its vehicle rental review with broad engagement with the industry to address industry practices that raise consumer protection issues.
The Australian Consumer Law provides that a court may determine that a term of a standard form consumer contract is unfair and therefore void, meaning that the contract is treated as if the term never existed. A term is considered unfair if:
- it would cause significant imbalance in the parties’ rights and obligations under the contract
- it is not reasonably necessary 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 upon.
If a term is declared void, the remainder of the contract continues to bind the parties to the extent that it can operate without the unfair term.
From 12 November 2016, the unfair contract term law will also apply to unfair terms in standard form contracts with small business. For further information, visit Unfair contract terms.