Not so fair after all: Further non-grey list clauses that might fall foul of the UCT regime
This post is the second instalment of our deep dive into clauses that, despite not being mentioned as grey list clauses in section 25 of the Australian Consumer Law (ACL), are still ones to be wary of.
In this post, we look at extraneous contractual term clauses and collection of data clauses.
Extraneous contractual term clauses
It is not uncommon for contracts to incorporate additional terms by reference to extraneous documents located elsewhere, such as policies and other terms and conditions. This might occur in a number of ways, for example by including a hyperlink from the contract to the extraneous document. However, these clauses can be problematic if the location of the extraneous documents changes and they are no longer accessible, or if the content of the documents are amended without the customer being notified.
In ACCC v Fujifilm Business Innovation Australia Pty Ltd  FCA 928, Fujifilm admitted and the Court determined that nearly 300 contracts terms (which were contained in around 34,000 contracts) were either unfair on their own or unfair when read in conjunction with other clauses . These unfair terms included clauses which incorporated additional contractual terms by reference to one or more extraneous documents that were not only difficult for customers to locate or identify but which Fuji was able to unilaterally vary without any obligation to provide notice of the variation to the customer .
In a separate term, the customer warranted that:
- it had read each document forming part of the contract, including extraneous documents that Fuji may not have provided, and
- it enters into the contract solely on the contents of the contract, thereby purporting to exclude any liability on the part of Fuji for pre-contractual representations .
This term was also held to be unfair.
One way for businesses to avoid this risk is to include within or attach the extraneous document to the contract itself. If this is not feasible, businesses should ensure that the extraneous documents are provided to the counterparty, remain easy to locate, and cannot be unilaterally varied without notice being given to the other party.
In the case of Fujifilm, the extraneous documents resulted in certain contractual terms being unfair. There is also a separate question as to whether the extraneous document is incorporated as a term of the contract or raises a contractual relationship in and of itself – in which case it should be reviewed for UCT, or whether the extraneous document should be reviewed for UCT in any event. This will often depend on how the extraneous document is referred to in the contract and as part of the particular transactional matrix.
Collection of data clauses
Data and privacy are hot topics in Australia, with increased public awareness of the risks associated with the collection, use and storage of personal information. Although there has not yet been a case considering whether a collection of data clause is an unfair term, this is one to watch in the future.
As already outlined in our previous post, a clause may be considered ‘unfair’ In the context of the UCT regime if it meets each of the three limbs in section 24(1) of the ACL. Without judicial consideration of data collection clauses, it is tricky to pinpoint the characteristics of such clauses that would deem them unfair. However, theoretically a data collection clause could satisfy the three-limb test as follows:
- A data collection clause may cause a significant imbalance in the parties’ rights and obligations under the contract if, for example, it gives a company broad and unfettered rights to collect, use and disclose consumer’s personal information without giving consumers the option to opt-out of the clause.
- An overly broad data collection clause may not be considered reasonably necessary to protect the legitimate interests of the company if it collects data that is beyond what is required to protect said interests. What it means for there to be ‘legitimate interests’ depends on the nature of the business of the company and the context of the contract as a whole – don’t forget though, there is a presumption that a term is not reasonably necessary to protect the legitimate interest of the company, which they will bear the onus of rebutting.
- Detriment can be financial or non-financial, potentially opening the door for consumers to make out a claim in instances where, for example, they suffer inconvenience, distress or delay in relation to the collection of their data.
- In the context of a data breach, it seems fairly clear that a consumer whose personal information had been leaked has the potential to suffer both financial and non-financial detriment.
Companies should review their standard form small business and consumer contracts to ensure that they are in compliance with the new unfair contract term regime and are not collecting data ‘unfairly’. There are analogies here to the requirements under the Australian Privacy Principles, which include an obligation to only collect personal information ‘by lawful and fair means.’ Consumers and small business, in turn, should be aware of the risks associated with data collection and seek legal advice if they have any concerns about the fairness of a term.
What clauses do I need to review?
While section 25 of the ACL does offer guidance in relation to clauses that courts can find unfair if used in a consumer or small business contract, it is not an exhaustive or definitive list of UCTs. Courts can and do look beyond this list. In our two most recent posts covering non-grey list clauses, we have examined a number of further examples of clauses which, under certain circumstances, courts may deem unfair: automatic renewal, exclusive dealing, non-disparagement, extraneous contractual terms and collection of data clauses.
What is important to remember is that any clause that potentially creates a power imbalance between the contracting parties, extends beyond what is reasonably necessary to protect the legitimate interests of the party advantaged by it, and which could cause detriment to a party if it were applied or relied on, could be unfair in the eyes of a court. Particularly as the new UCT penalty regime comes into play from 9 November 2023, businesses should consider whether terms (and not only the grey list terms) may be at risk of challenge.
This post was written by Maeve Moore and Ella Seaton.