Unconscionable conduct
Conduct may be unconscionable if it is particularly harsh or oppressive. To be considered unconscionable must be more than simply unfair—it must be against conscience as judged against the norms of society. It can occur between businesses and consumers or business to business.
There are a number of factors a court will consider when assessing whether certain conduct is unconscionable:
- the relative bargaining strengths 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 price, or other circumstances, under which the weaker party would be able to buy or sell equivalent goods or services
- the requirements of applicable industry codes
- the willingness of the stronger party to negotiate
- whether the stronger party has the right to unilaterally change contract terms
- the extent to which the parties acted in good faith toward each other
- any other factor indicating that the stronger party acted with little or no regard to conscience.
Real case study: A mobile phone company was found to have engaged in unconscionable conduct in relation to its sales methods used to induce customers to enter into contacts, the terms of the contracts and the company’s enforcement of the contractual terms.
The company relied upon and enforced a 'day cap' clause in its mobile contact, which in some cases only allowed a customer to make an approximately two minute call per day before being charged fees in excess of the monthly contract charge. The structure of the contracts meant that customers were very likely to incur high excess usage charges as the operation of this term was not adequately disclosed.
The Federal Court also found that a $75 cooling off fee that customers were required to pay was unconscionable, as was a $195 charge imposed for returning a damaged phone, even if only the box was damaged.
The company was ordered to pay penalties totalling $455 000, and its two directors were ordered to pay penalties and were disqualified from managing a corporation for periods of three and two and a half years respectively.
Case law: Federal Court of Australia - [2013] FCA 350
Media release: Court finds mobile phone company acted unconscionably
Case law: Federal Court of Australia - [2013] FCA 1267
Media release: Court orders mobile phone company to pay $455,000 for engaging in false, misleading and unconscionable conduct
Related information: Unconscionable conduct
Related publication: Business snapshot: unconscionable conduct
Legislation: Australian Consumer Law Part 2-2