Unfair contract terms

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Definition

An unfair contract term is one that:

  • will cause a significant imbalance in the parties rights and obligations arising under the contract;
  • is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by them; and
  • would cause detriment to a party if it were to be applied or relied upon.

Effect of Unfair Contract Terms

Some of the matters that may be affected by unfair contract terms:

  • right to avoid or limit the performance of the contract, terminate it, vary its terms or renew or not renew the contract;
  • rights to change the price or characteristics of the goods or services to be supplied;
  • determining when the contract has been breached and the extent of liability for the breaches;
  • limits on the parties right to sue each other and the other evidence that can be led in proceedings on the contract.

Examples of Unfair Contract Terms

Some examples of unfair contract terms include:

  • a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract;
  • a term that permits, or has the effect of permitting, one party (but not another party) to terminate the contract;
  • a term that penalises, or has the effect of penalising, one party (but not another party) for a breach or termination of the contract;
  • a term that permits, or has the effect of permitting, one party (but not another party) to vary the terms of the contract;
  • a term that permits, or has the effect of permitting, one party (but not another party) to renew or not renew the contract;
  • a term that permits, or has the effect of permitting, one party to vary the upfront price payable under the contract without the right of another party to terminate the contract;
  • a term that permits, or has the effect of permitting, one party unilaterally to vary the characteristics of the goods or services to be supplied, or the interest in land to be sold or granted, under the contract;
  • a term that permits, or has the effect of permitting, one party unilaterally to determine whether the contract has been breached or to interpret its meaning;
  • a term that limits, or has the effect of limiting, one party’s vicarious liability for its agents;
  • a term that permits, or has the effect of permitting, one party to assign the contract to the detriment of another party without that the parties consent;
  • a term that limits, or has the effect of limiting, one party’s right to sue another party;
  • a terms that limits, or has the effect of limiting, the evidence one party can adduce in proceedings relating to the contract;
  • a term that imposes, or has the effect of imposing, the evidential burden on one party in proceedings relating to the contract;
  • a term in kind, or a term that has an effect of a kind, prescribed by the regulations.

This information is for information purposes only and is not legal advice. You should obtain advice that is specific to your circumstance and not rely on this publication as legal advice. Please contact us if you wish for us to advise you on any issue you may have arising from this publication.

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