Articles

Artists & the New Unfair Contract Terms Legislation

30th September 2010

The Commonwealth government has introduced new laws regarding unfair contract terms in standard form consumer contracts. These new laws came into effect on 1 July 2010. The provisions dealing with unfair terms are set out in Schedule 2 to the Trade Practices Act (now the Competition and Consumer Protection Act) under the heading "Australian Consumer Law" ('ACL'), which applies across Australia.

Limited applicability to Artists

The Unfair Contract Terms provisions in the ACL render unfair terms void in limited circumstances. The major impediment to the ACL protecting artists is the need to establish that the contract is in fact a consumer contract.

Under section 2(3) of the ACL, a consumer contract 'is a contract for:

  1. a supply of goods or services: or
  2. a sale or grant of an interest in land;

to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption'.

This provision severely limits the applicability of the ACL to artists. A good deal of the time an artist will enter into an art-related contract for predominantly business, rather than personal or domestic purposes. As such, the Unfair Contract Terms provisions of the ACL will not protect them from unfair terms in contracts made with parties such as venues, galleries, promoters, booking agencies and managers. However, the unconscionability provisions of the ACL may offer some protection as they apply to business-to-business contracts.

It appears that establishing personal, domestic or household use will be easier the less established an artist's career is. For instance, contracts pertaining to rehearsal room hire or production might fall under the ACL where the musician rehearses for performances at home or a friend's house, or produces CDs for distribution to friends and family members as Christmas presents. In any case, it appears that those important contracts that artists enter into during their career, the contracts that are more likely to create substantial disputes, are not covered by the unfair terms provisions of the ACL.
 

Contracts Contracts, uploaded to Flickr by Nob Mouse. Licensed and adapted under a Creative Commons Attribution 2.0 License

Other Requirements

Firstly, the contract must have been entered into, renewed or amended, on or after 1 July 2010. Further, the term will only be void where it is unfair, and it appears in a standard form consumer contract (ACL s.2(1)(b)). This is a contract that a consumer is required to enter into on a 'take it or leave it' basis (i.e. there is no opportunity for the consumer to negotiate the contract terms). If you buy an airline ticket, for example, the airline sets the terms of the contract, and the consumer does not have any opportunity to discuss or negotiate any of the terms in the contract before buying the ticket.

1. Standard Form Contract

If a matter involving unfair terms does go to court under the ACL, the artist will have the benefit of the presumption that the contract is a standard form contract (ACL s.7). In most cases it is reasonably obvious whether the contract is a standard form contract or one where there was some negotiation about the contract terms. If there is some doubt about the issue, the court may take into account a range of factors in deciding the nature of the contract. Factors include but are not limited to: the respective bargaining power of the parties, which party prepared the document and whether there was discussion about the terms prior to preparation and the other party's opportunity to negotiate (ACL s.7(2)).

2. Unfair Terms

Possibly the most contentious issue is whether a term is unfair. Under s.3(1) of the ACL, a term is unfair if:

  1. it would cause a significant imbalance in the parties' rights and obligations arising under the contract; and
  2. it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
  3. it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

Alternative Avenue: Unconscionability

Where an artist such as an independent musician does not meet the requirements of the unfair contract term provisions, they may be able to resort to the unconscionability provisions in the Trade Practices Act ('TPA') under section 51AC. These provisions aim to protect parties from being taken advantage of. There a numerous factors the court will consider, these include but are not certainly not limited to: the relative bargaining strengths of the parties, whether the business consumer (the artist) was able to understand relevant documents for the supply of goods or services, undue influence, unreasonable failures to disclose certain information, the ability for the business consumer (the artist) to negotiate, the power to verify the contract unilaterally, and good faith.

Conclusion

It appears that the new legislation dealing with unfair contract terms in standard consumer contracts offer little protection to artists contracting in that capacity.


Sally Whiteman is a final year student Monash University. She is actively involved in the Australian music scene assinger/songwriter for The White Electric and as radio host/producer for an Australian music program.