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Australian Consumer Law: Unconscionable conduct

Overview

Unconscionable conduct deals with transactions between dominant and weaker parties; it therefore overlaps with duress and undue influence. Unconscionable conduct is prohibited both in equity and, more recently, by statute.

 

Equity

Equity intervenes where one party has taken advantage of a 'special disability' (most commonly age, illiteracy, lack of education or a combination of factors) held by the other. The resulting transaction must normally also be harsh and oppressive to the weaker party. Where established the weaker party may choose to avoid the transaction.

 

Statute

The Australian Consumer Law introduced nationally consistent prohibitions on unconscionable conduct (Part 2-2 of the ACL). The first of these prohibitions entrenches into statute the equitable doctrine of unconscionable conduct, thereby extending the range of remedies available to parties affected by unconscionable conduct. The second prohibition extends the concept of unconscionability beyond that recognised in equity and can be relied upon by all persons, other than listed corporations, who acquire or supply goods or services in trade or commerce.

Section 20 of the ACL (which is in identical terms as its predecessor, s 51AA of the Trade Practices Act) prohibits unconscionability engaged in by a corporation 'within the meaning of the unwritten law' (meaning the equitable doctrine of unconscionable conduct). To prevent overlap, s 20 will not apply where s 21 applies.

Section 20(1)
A person must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time.

Note: A pecuniary penalty may be imposed for a contravention of this subsection.

Section 21 prohibits unconscionable conduct in connection with the supply or acquisition of goods or services by or form a person (other than a listed public company).  It is not intended to be ‘limited by the unwritten law relating to unconscionable conduct’ and relevant factors extend beyond 'consideration of the circumstances relating to formation of the contract' to the terms of the contract themselves (substantive unconscionable conduct). 

Section 22 sets out a range of factors a court may consider when determining whether conduct is unconscionable. 

 

More detail on recent cases to follow