A contract is an agreement between people where each party are held accountable for what they promise to do.
Most people who sign a contract intends to follow through with what they promised to do for the other parties involved. Contracts can be entered between people for many reasons, whether it be a gym membership, subscription services, venue hire and many more.
Despite having the best intention to commit to one’s promise, sometimes life takes a wrong turn and it causes a person to no longer be able to perform their part of the contract, for example, you can lose your job and no longer able to continue to make payment to a subscription service.
Usually, when one party fails to perform their obligation under the contract, it is seen as a default and the party that is not defaulting will have some the right under the contract to remedy the situation and usually the remedies come in the form of monetary compensation.
Unfair Contract Terms
Not every clause in a standard contract is enforceable. The Australian Consumer Law has introduced the national unfair contract terms to protect consumers from clauses that are deemed unfair.
A clause may be deemed as unfair if the following three conditions are met:
1. If the clause is one-sided and only severely favours the business over the consumer;
2. The absent of good reasons for having such a clause; and
3. It will cause the consumer to suffer financial loss.
Some example of clauses that may be deemed unfair are clauses that allow businesses to make changes on essential parts of the contract without consulting the consumer, clauses that limit the liability of parties who breach the contract, clauses that require consumers to pay an excessive amount of compensation often called cancellation fees or penalty clauses.
Real Life Example
A client of ours had signed a contract with a wedding venue provider with the minimum cost on the contract being approximately $40,000.00. Our client had paid two lots of deposit totalling at $15,000.00 as required under the contract.
At the time of signing the contract, our client had every intention to get married on a specific date and enjoy the service of the wedding venue provider. However, due to unforeseen circumstances, the wedding did not go ahead and led to our client to reluctantly cancel the entire wedding one more before the big day.
In the contract, there was a cancellation policy that required our client to pay 70% of the estimated cost under the contract and the wedding venue provider sought to enforce such a clause by making a claim against our client for an additional sum of approximately $13,000.00 through the Local Court.
We managed to help our client by defending against the claim which resulted in the wedding venue provider in dropping their claim and paying monetary compensation to our client.
Moral of the story
1. Important contracts or contracts that involve a large sum of money should be reviewed by a legal professional;
2. Not all clauses in a contract are fair;
3. Not all clauses in a contract are enforceable;
4. There are many protections offered by legislation to protect consumers; and
5. Contracts should be properly drafted by legal professionals to avoid any potential breaches with legislation.
If you need help in reviewing a contract, whether you are a business providing goods or services, or a consumer who is about to commit to a promise, feel free to contact our team for any assistance.
Disclaimer: The information above is intended to be general information only and it should not be relied upon it as legal advice. If you seek professional advice please feel free to contact the team at Lincoln Legal or make an enquiry.