Report No. 199

The Contract Review Act, 1980 (New South Wales):

The Contract Review Act, 1980 (CRA) protects persons from using unjust contracts or provisions. Section 6(2) states that relief under the Act is not available so far as contracts entered into in the course of or for the purpose of a trade, business or profession carried on or proposed to be carried on by the person, other than a farming undertaking in New South Wales. Under Section 7, there are various avenues available to the Court on a finding of an unjust contract or contractual provisions.

The CRA provides that a court can grant relief in relation to a consumer contract if it finds the contract or a provision of the contract to have been "unjust" in the circumstances relating to the contract at the time it was made. The court can refuse to enforce any or all of the provisions of the contract and declare the contract void, in whole or in part; make an order varying the provisions of the instrument or terminating or otherwise affecting its operation or effects. The CRA operates concurrently with the Uniform Consumer Credit Code (UCCC). (See Unfair Contract Terms, A Discussion Paper, January 2004) (Queensland and Victoria).

"Unjust" is defined in the CRA as including what is unconscionable, harsh or oppressive.

Section 9(1) of the CRA sets out the matters which the court must consider in determining if the contract or a term is unjust: the public interest and all the circumstances of the case, including such consequences or results as those arising in the event of:

(a) compliance with any or all of the provisions of the contract, or

(b) non-compliance with, or contravention of, any or all of the provisions of the contract.

Under section 9(2) wherever relevant, the Court is also to have regard to procedural issues such as material inequality of bargaining power, relative economic circumstances, educational background, literacy of the parties, any unfair pressure, whether or not legal or expert advice was sought, but also substantive issues such as:

(d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract; and

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(g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed.

Section 9 which bears the title 'Matters to be considered by the Court' reads as follows:

"9 Matters to be considered by Court.-(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of:

(a) compliance with any or all of the provisions of the contract, or

(b) non-compliance with, or contravention of, any or all of the provisions of the contract.

(2) Without in anyway affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, including the following:

(a) whether or not there was any material inequality in bargaining power between the parties to the contract,

(b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation,

(c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract,

(d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract,

(e) whether or not:

(i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or

(ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity,

(f) the relative economic circumstances, educational background and literacy of:

(i) the parties to the contract (other than a corporation), and

(ii) any person who represented any of the parties to the contract,

(g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed,

(h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act,

(i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect,

(j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act:

(i) by any other party to the contract,

(ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or

(iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract,

(k) courses of dealing to which any of them has been a party, and

(l) the commercial or other setting, purpose and effect of the contract.

(3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made.

(4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made.

(5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made.