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Competition & Consumer Law Update
09 September 2011

ACCC takes first action under unfair contract terms provisions of the Australian Consumer Law

The ACCC has commenced proceedings against a medical treatment business, NRM Corporation Pty Ltd and NRM Trading Pty Ltd (NRM), in relation to certain contractual terms entered into with its patients. In doing so, the ACCC has taken its first action under the Australian Consumer Law (ACL) relating to ‘unfair terms’.

It is alleged that NRM’s practice was to have patients sign treatment contracts that required patients to provide 30 days’ written notice to terminate the agreement and, if terminated, pay a number of fees, including a fixed administrative fee of 15% of the original contract price.

The ACCC claims that these terms are unfair under the ACL.  An ‘unfair terms’ regime has existed in Victoria for sometime under the Fair Trading Act 1999 (Vic).  The ACL implemented a new uniform national unfair terms regime on 1 July 2010.  

Under this new regime, a term in a consumer contract is void if:

  • the term is unfair; and

  • the contract is a ‘standard form' contract.

A 'consumer contract' is a contract for the provision of goods or services to an individual whose acquisition of the goods, services or land is wholly or predominantly for personal, domestic or household use or consumption.  ‘Standard form’ contracts can include contracts which are not negotiated or where there is an inequality of bargaining power prior to signing.  Examples of 'standard form' contracts could include mobile phone contracts, utility contracts and gym memberships.

Unfair terms may include terms which:

  • allow a supplier to vary terms;

  • penalise one party;

  • allow one party to unilaterally determine that a breach has occurred; or

  • limit one party’s right to sue another party.

 Where a term is deemed to be unfair, it will be void.

In these proceedings, it is likely that the ACCC will be seeking to establish that the imposed exit fees penalise patients and, in so doing:

  • causes a significant imbalance in the parties’ rights and obligations;

  • causes detriment to the patient; and

  • were not reasonably necessary to protect NRM’s legitimate business interests.

We will continue to provide further updates on the matter.

Zoe Solomon, Trainee Lawyer, contributed to the writing of this article.

For further information, please contact:

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