UNCONSCIONABLE CONDUCT

Unconscionable conduct is any behaviour which has the effect of unlawfully placing the other party to a transaction at a serious disadvantage. Section 13 of the Fair Trading Act (the Act) provides a remedy by empowering the court to order a trader to change their behaviour in relation to the supply of goods or services normally purchased for personal or domestic use. The following situations may be taken into account when determining whether unconscionable behaviour has taken place:

• the bargaining strengths of the supplier and the consumer are unequal.
• the consumer was unable to understand any documents involved.
• the consumer was required to agree to conditions which were unnecessary to the transaction.
• any undue influence or pressure was exerted on the consumer.
• any unfair tactics were used against the consumer.

In practical terms, this means that a business person cannot use a particular weakness of a person in order to gain business. Nor can the business person try to put the consumer at a disadvantage in order to gain their business.

EXAMPLES

• not ensuring that a consumer with limited reading skills or with limited English fully understood and agreed to any contract signed.
• using a friend or relative of the consumer to influence the consumer's decision.
• inducing the consumer to sign a blank contract.
• taking advantage of the consumer's sickness, age or disabilities
• contracts which make false statements.
• one sided contracts. For instance, contracts that are unclear about the consumer's rights, contracts that are so tough the consumer cannot help breaking them or contracts that can be broken easily by the business but not by the consumer.
• using high pressure tactics, for example refusing to take "no" for an answer.

Be careful when signing contracts! It is important to remember that consumers do not have to sign anything they don't agree to. Even if the business uses a standard contract, consumers have aright to try and negotiate terms that suit them better.

Consumers also have a right to be informed about exactly what terms they will be agreeing to.

A recent Federal Court decision awarded $82,000 compensation to three franchisees of the Cheap As Chips group for unconscionable conduct. This included the termination of a franchise over a payment dispute; threatening to terminate franchisees rather than negotiate over money owed and attendance at seminars unrelated to the company's business of carpet cleaning.

There are many other known instances of unconscionable conduct including pressure applied by landlords for advantages when leases are up for renewal. Unconscionable conduct goes beyond driving a hard bargain. It involves situations of power imbalance where the stronger party takes advantage of the weaker when the weaker party is at a disadvantage.

EXAMPLE - MARKET GARDENERS

The Federal Court of Australia declared that Avanti Investments had engaged in unconscionable conduct and made various misrepresentations to the lessees who were Vietnamese farmers with little formal education or knowledge of English. In 1994 Avanti entered into agreements with two farmers to lease the land for eight years with no limitation on bore water use. This land was later sublet to the five farmers in dispute who invested considerable resources into working the land. In 1998 Avanti unlawfully claimed a right to break and vary the leases, and in 1998 and 1999, made the farmers sign new leases reducing the amount of water available. The farmers were also told that the leases were the same as the 1994 lease except for the rent and the terms. Avanti demanded payment from the farmers of over $67 000 for excess water for the years 1998/1999 and 1999/2000. M R 5/3/02.