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Law Notes Contracts 2 Notes

Statutory Unconscionable Conduct Unjust And Unfair Terms And Third Party Impropriety Notes

Updated Statutory Unconscionable Conduct Unjust And Unfair Terms And Third Party Impropriety Notes

Contracts 2 Notes

Contracts 2

Approximately 189 pages

Detailed notes (primarily case notes) on the topics of Incorporation of terms and construction, factors vitiating a contract and damages and included are super summaries ideal to take into an open book exam....

The following is a more accessible plain text extract of the PDF sample above, taken from our Contracts 2 Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Statutory Unconscionable Conduct, Unjust and Unfair terms and Third Party Impropriety

Statutory Unconscionable Conduct (SUC)

  • The provisions relating to SUC are found in Pt IVA of the TPA, the relevant provisions are s 51AA, s 51AB and s 51AC

  • In contract law, an important feature of these provisions is that they extend beyond pre-contractual conduct affecting formation to post-contractual conduct relating to performance and termination

  • They may also extent to substantive Unconscionability (substantive terms of the contract) , not just procedural Unconscionability (conduct in the process of making the contract)

Part IVA: Trade Practices Act

Section 51AA

“A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories”

  • The reference to unwritten law refers to the common (judge-made) law.

  • Remedies for violation of this section are set out in Pt VI and are more extensive than under the common-law. The ACCC is capable of invoking these remedies

ss2 provides that this section does not apply to conduct set out in the below sections

Section 51AB

“A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person, engage in conduct that is, in all circumstances, unconscionable.”

ss5 limits this to consumer transactions – i.e. ‘goods or services’ must refer to ‘goods or services of a kind ordinarily required for personal, domestic or household use or consumption

ss6 provides that supply does not refer to supply for possible re-supply/transformation/using up in trade/commerce

  • Though Unconscionability isn’t defined the court can take into account things in ss2 which include:

    1. Relative bargaining strengths of the corporation and consumer

    2. Whether as a result of the corporations conduct the consumer was required to comply with conditions not reasonably necessary for the protection of the legitimate interests of the corporation

    3. Whether the consumer was able to understand documents relating to supply/possible supply of the goods

    4. Whether undue influence/pressure was exerted or unfair tactics used against the consumer or person acting on behalf of the consumer by a corporation or person acting in behalf in relation the supply..

    5. The amount and circumstances which the consumer could have acquired identical/equivalent goods/services from a person other than the corporation

Section 51AC

This section is directed at protecting small businesses in their dealing with big businesses

ss1 provides that corporations must not, in connection with a) supply of G&S, b) acquisition of G&S engage in conduct that is unconscionable

ss2 provides the same for a person a person must not, in connection...

ss9 and ss10 provide that these do not apply to substantial transactions – e.g. the supply/acquisition of goods at a price > $10,000,000

ss3, ss4 sets out matters to be taken into account when determining Unconscionability – ss3 refers to suppliers while ss4 refers to acquirer. They include, as well as the above

  1. The extent to which the suppliers conduct towards the business consumer was consistent with their conduct in other transactions

  2. The requirements of applicable industry codes

  3. The requirements of other industry codes, if the business consumer acted on the reasonable belief that the supply would comply with that code

  4. The extent to which the supplier unreasonably failed to disclose to the consumer

    1. Any intended conduct that might affect their interest

    2. Any risks arising from his intended conduct (that he should have foreseen would have been apparent to the consumer)

  5. The extent to which the supplier was willing to negotiate T&Cs of any contract for the supply of G&S to the consumer

  6. The extent to which the supplier and the business consumer acted in good faith

The meaning of unconscionable conduct

  • Although not defined in statute, the historical background of the provisions is considered in ACCC v CG Berbatis – the equitable concept is explored aiding this interpretation

Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51

Relevant Facts: The case involved the lessees to a shop in a shopping centre. In 1990 the lessees and a number of other tenants were involved in litigation concerning overpayments on the lease, they estimated this to be at $50,000. The lease was due to expire in ’97 and the lessees made it apparent to the manager of the centre that they were anxious to sell their business and that they wished to negotiate a new lease term. The lessor required in the deed of assignment a clause that would discharge the owners from all claims made by the lessees prior to the assignment date – they were advised by their lawyer not to sign but had no choice. Supreme court proceedings were initiated by the other lessees and if they had participated they would have recovered around $2800. In ’98 the ACCC instituted litigation in the FCA, alleging that cl14 was in contravention of s51AA of the Act. The primary judge granted declaratory relief while the Full Court allowed the appeal and ordered that the application be dismissed. The appellant was granted special leave and appealed to the High Court.

Principle (Gleeson CJ):

  • Gleeson CJ framed his judgement with the fact that while the lessees were in a difficult position, the lessors gave them an extension which they were not obliged to give. His logic based argument was that if this was the case the lessor should have just refused to discuss the renewal with the lessees

  • He confirmed the fact that unconscionable conduct was ‘the knowing exploitation...of the special disadvantage’ which was ‘a disabling circumstance seriously affecting the ability of the innocent party to make a judgement in...best interest’ – and that this was consistent with what the statute called the ‘unwritten law’

  • He proceeded to refer to the categories...

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