Sharpening the Blue Pencil in Australian Consumer Law: The Striking Out of Unfair Contract Terms in Land Transactions

In Australia, like many other jurisdictions, principles of fairness and transparency underpin modern consumer protection laws applying to traditional consumer transactions. These laws had focused on those transactions involving the supply of goods or services for personal, domestic or household use, and in the case of the supply of goods, to personal property transactions. An overriding objective of consumer protection law is to support the bargaining position of the perceived weaker party giving access to greater rights of redress should the stronger party seek to exploit that weakness.

The commencement of the Australian Consumer Law (ACL) on 1 July 2010 introduced a national consumer law regime applying across Australia and has extended the blue pencil principle to Unfair Contract Terms (UCT) in land transactions. The ACL interferes with the contractual terms between the parties involved in a standard form consumer contract by declaring void those terms that fail to meet the ‘fairness test’, severing the unfair term from the contract.

This paper questions whether such an extension is justified in circumstances where existing protection is already provided under the common law, in equity and transparency principles integrated in real property laws supporting those ‘consumers’ involved in land transactions. It also questions whether the UCT provisions could be open to abuse by unmeritorious parties seeking to avoid otherwise binding contractual obligations.