Transcript Document
13 Statutory Unconscionability © Oxford University Press, 2007. All rights reserved. Statutory Unconscionability Statutory Unconscionability cont... Overview of the three TPA statutory provisions governing unconscionability: (i) s 51AB - 1986: consumer-type transactions (ii) s 51AA - 1992: certain commercial transactions (iii) s 51AC - 1998: small business transactions. Statutory Unconscionability cont... Section 51AB: • quite broad - catches conduct in, or in connection with, contracts of sale and conduct during negotiations • does not give court complete power to rewrite contracts. Subject to specific limitations or threshold requirements: (i) targets conduct of corporations (note extended reach) (ii) in trade or commerce (iii) in connection with purchases by consumers. Statutory Unconscionability cont... Definition of “consumer”: • s 51AB (5): goods or services must be “of a kind ordinarily acquired for personal, domestic or household use or consumption” • s 51AB (6) excludes goods bought for the purpose of resale, supply or manufacturing purposes etc • thus basic purpose of ss (5) & (6) is to limit s 51AB to consumer and consumer-type dealings. Statutory Unconscionability cont... Parameters of s 51AB • contracts caught under s 51AB (unconscionability) fewer than those covered by s 4B (implied terms) • reason – s 51AB has no threshold limit of $40,000 • thus: (i) under s 4B, if contract price under $40,000, then TPA usually applicable – whether the goods are for consumer or commercial use (ii) under s 51AB, no such threshold limit. Thus overriding requirement that goods or services must be of a kind ordinarily acquired for personal, domestic or household consumption. All goods of a commercial nature excluded. Statutory Unconscionability cont... What is unconscionable conduct under s 51AB? • s 51AB(2) provides guidelines – not exhaustive • s 51AB(2) comprises both procedural and substantive unconscionability factors • compare Amadio/equitable doctrine - only concerned with procedural factors. Statutory Unconsionability cont... Procedural unconsionability: • terms hidden away in the document, incomprehensible language • inequality between parties due to factors like age or illiteracy • oppression, deception or other sharp practice: conduct of the stronger party • s 51AB(2)(a)(c) & (d) deal with procedural unconscionability. Statutory Unconscionability cont... Substantive unconscionability: • are the terms, in the way they operate in practice, unduly one-sided from perspective of weaker party? • overall imbalance in the terms • harsh or unreasonable terms • examples: certain exclusion clauses or accelerated payment clauses • s 51AB(2)(b) & (e) provide examples of substantive unconscionability. Statutory Unconscionability cont... Remedies for breach of s 51 AB: • s 80 injunctions • s 82 damages • s 87 orders • s 87 provides very flexible range of remedies; court has broad discretion in terms of remedy. Statutory Unconscionability cont... Remedies for breach of s 51AB (cont): • court can ‘re-write’ contract by varying it in whole or in part • court can refuse to enforce any or all of the terms of the contract • note that under s 87, bars to rescission do not automatically apply. Statutory Unconscionability cont... Response to s 51AB • note debate - some said s 51AB was too narrow and should be extended to include commercial transactions (now see s 51AC, operative 1 July 1998) • others argued s 51AB still placed too much emphasis on procedural unfairness rather than the substantive content of the contract. Statutory Unconscionability cont... Response to s 51 AB (cont): • some critics argued that the criteria did not provide court with sufficient guidance as to whether conduct was unconscionable ie. the court has too much discretion to re-write contracts and as a result, the provision undermines concepts of freedom and sanctity of contract. Consider whether the same argument may be made in relation to s 51AC. Statutory Unconscionability cont... Debate about extension of unconscionability to commercial transactions (now see s 51AC): • concerns about commercial certainty • Amadio normally inadequate: focus on special disability and procedural unconscionability; unfair terms not sufficient to activate equitable doctrine • Zumbo: very balanced US approach to s2/302 Uniform Commercial Code (statutory unconscionability in commercial transactions, similar to s 51 AC). Statutory Unconscionability cont... Section 51 AA: introduced in 1992 • codifies equitable doctrines; confers no new rights • covers conduct that is unconscionable within the meaning of the unwritten law from time to time of the states and territories ie. commercial transactions within Amadio or Garcia • allows access to more flexible remedies under s 87 • also confers procedural advantages (eg. access to Federal Court). Statutory Unconscionability cont... Threshold requirements of s 51AA: • targets conduct by corporations (compare state equivalents - “persons” - and equity where the stronger party does not have to be a bank or a credit union etc) • in trade or commerce (commercial aspect) • conduct must be unconscionable within Amadio or Garcia etc. Statutory Unconscionability cont... Outcome of debate: s 51 AC • commenced operation 1 July 1998 • mirrors rights available to consumers under s 51AB • objective to assist ‘small business’- s 51AC is limited to transactions which do not exceed $3m • also limited to unconscionable conduct in relation to the supply or acquisition of goods or services for the purposes of trade or commerce. Statutory Unconscionability cont... Section 51 AC: • s 51AC(3) & (4): checklist of factors to help court determine whether conduct is unconscionable • ss 51AC(3) &(4) (a)-(e) almost identical to checklist in ss 51AB(2)(a)-(e) • extra tests of unconscionability relevant to small business have been added – eg. compliance with industry codes of conduct, acting in good faith • see ACCC v Simply No-Knead (Franchising) P/L. Statutory Unconscionability cont... Remedies for breach of s 51AC: • s 80 injunctions • s 82 damages • s 87 orders. Note guidance provided by ACCC: Small Business Guide.