What is Unconscionable Conduct? (2024 Update)

What is Unconscionable Conduct? (2022 Update)

Is it illegal to pressure a non-English-speaking person to sign a contract written in English? What about deliberately including ambiguous terms in a contract to create a sense of confusion and unnecessary pressure? 

Australian courts might consider these actions to be unconscionable conduct that should be punished under the law. 

Laws against unconscionable conduct also apply to businesses in regard to their interaction with customers. Therefore, it’s crucial for business owners to understand unconscionable conduct so they can avoid acting unconscionably and ensure their business is acting ethically to avoid legal consequences.

In this article, we’ll explain what unconscionable conduct is, provide examples of unconscionable conduct, the laws that cover unconscionable conduct and other frequently asked questions. 

Read along!

Table of Contents

What is unconscionable conduct?

The Australian Competition and Consumer Commission(ACCC) defines unconscionable conduct as a statement or action that’s considered so harsh that it goes against good conscience. There isn’t a definitive legal meaning of unconscionable conduct. This is because courts have developed this concept over the years by analysing each case individually.

Courts determine if the conduct is unconscionable by analysing if it’s contrary to community morals and principles. The concept of unconscionable conduct is broad. The purpose of this is to capture all the creative ways businesses can act unconscionably.

For courts to rule that conduct is unconscionable, they must find that it was more than simply unfair. They’re required to find that the behaviour was particularly harsh, and it must be found to be against good conscience according to societal standards. 

For example, courts have held that convincing an alcoholic to drink a bottle of rum while entering into negotiations is against good conscience.

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Which laws govern unconscionable conduct?

In addition to the courts, there are some provisions contained in the Competition and Consumer Act 2010 (Cth) that govern unconscionable conduct. The law prohibits unconscionable conduct in the following circumstances: 

Therefore, unconscionable conduct can occur at any time during an ordinary transaction.

What are some examples of unconscionable conduct?

Although courts look at a number of factors when deciding whether conduct is unconscionable for each case. There are many common examples of unconscionable conduct. These include the following:

  • When one party has less bargaining power than the other, and the party with more bargaining power uses this to their advantage
  • When a customer or business is not given enough time to read and consider a contract 
  • When a party is not given an opportunity to seek advice or ask questions about the terms of a contract
  • Compelling someone to sign a blank contract
  • Refusing to take ‘no’ for an answer or creating a high-pressure environment where saying ‘no’ is difficult
  • Knowing a person does not speak English or has a learning disability and not explaining the conditions of a contract to them
  • If you do not provide a translator for a party that does not speak English, so they enter into an agreement without having a sufficient understanding
  • Using a friend or relative to influence the consumer’s decision

Each of these examples of unconscionable conduct involves one party exploiting the other party. Whether the exploitation is a result of a language barrier or someone not understanding their rights, both are considered to be harsh and oppressive measures that aren’t acceptable by societal standards. 

You should be aware that this is not an exhaustive list of examples of unconscionable conduct, and the court can find other forms of conduct to be unconscionable. 

What is good faith?

Good faith plays an important role in many aspects of business, including contract negotiations. Good faith refers to acting honestly and with fair intentions. If a party fails to act in good faith when dealing with businesses or customers, their conduct can be considered to be unconscionable. 

What should consumers look out for?

Unconscionable conduct affecting consumers is covered under section 21 of the Competition and Consumer Act 2010 (Cth). Here are some things you should watch out for as a consumer:

  • Be sure to fully understand all the terms of any commercial agreement before signing it, and do not sign any agreement without carefully reading it
  • In the event that your contract is unclear, you should always ask for plain language explanations because jargon can be confusing
  • If you feel like someone is forcing you into signing something make sure you don’t. You should hold off on signing anything until you have clarified any issues you’re not sure about
  • You should seek independent legal advice in cases where you’re feeling unsure or uneasy

What should small businesses be aware of?

Unconscionable conduct affecting small businesses is covered under section 22 of the Competition and Consumer Act 2010 (Cth). There are a number of things businesses such as yours should be aware of to avoid acting unconscionably and to notice when other parties are acting unconscionably. The behaviour of your business may be considered unconscionable if it’s found to be harsh or oppressive in such a way that’s beyond “tough commercial bargaining”. 

Your business should avoid exploiting other parties during negotiations, especially when their bargaining power is weaker. Furthermore, you should explain the contract to the other party and ensure that they understand their obligations. If there is a dispute between your business and the other party, you should be willing to resolve the issue and negotiate. 

In contrast, if you’re negotiating with a larger business, you should make sure you understand the contract terms. In the event that you don’t, you should seek legal advice to determine the meaning of the contract clauses. Key terms of the contract you must understand include those in regard to terminating the agreement, payment, deadlines, and who will be liable if the terms of the contract aren’t fulfilled. 

Although it can be difficult, your business should avoid signing any contract it isn’t ready to. You should generally avoid signing contracts on the spot, especially if you haven’t had adequate time to weigh your business’ interests against the contract’s terms.

What happens if my conduct is unconscionable?

The ACCC deals with cases of unconscionable conduct, and they also have the ability to take legal action against a business if they believe the business has acted unconscionably. 

Remedies available to a party that has been impacted by unconscionable conduct include compensation and the voiding of the contract. If your conduct or the conduct of your business is found to be unconscionable, financial penalties such as a fine will generally apply. 

In the event that a court finds that a business engaged in unconscionable conduct, they can impose significant fines. Courts can also instruct the business to address the issues resulting from its conduct.

Example of Unconscionable Conduct 

On the 26th of November 2020, the ACCC fined Telstra almost $50 million for unconscionable conduct. They were fined for using unethical sales practices that took advantage of 100 Indigenous Australians. They were selling these individuals overpriced phone contracts that they weren’t able to understand.

This conduct was found to be unconscionable due complexity of the contract terms and the socio-economic status of these individuals. Telstra accepted that they had breached Australian Consumer Law(ACL) as the indigenous customers didn’t understand the contracts they were entering into, and they also couldn’t afford them either.

What is unconscionable conduct in contract law? 

In contract law, unconscionable conduct refers to contracts where there is a power imbalance between the parties of the contract, and the stronger party exploits the weaker party’s bargaining power.   

How does Australian Consumer Law monitor unconscionable conduct?

Australian Consumer Law monitors unconscionable conduct by providing protection to customers against unfair business practices, including unconscionable conduct. ACL protects customers from the unconscionable conduct of business in relation to the following:

  • The methods used by a business to promote their products 
  • The methods used by a business to deliver and sell their services 
  • The terms a business includes in their contracts
  • The methods they use to collect payments from consumers

ACL is regulated by the ACCC, and they protect consumers from unconscionable conduct through the following methods:

  • Reports can be made to the ACCC by individuals who believe a business has acted unconscionably
  • The ACCC has the power to investigate the unconscionable conduct of a business, and they can take enforcement or compliance action against the business
  • The ACCC educates vulnerable groups regarding the rights they have as consumers. These groups include indigenous people, older Australians and individuals with diverse cultural and linguistic backgrounds

Conclusion

Many businesses can engage in unconscionable conduct without even realising it. There are times when what appears to be persuasive or creative promotional tactics can actually be illegal. That’s why it’s crucial for business owners to be aware of what constitutes unconscionable conduct to avoid legal consequences.

Contrastingly as a consumer, you should be aware of unconscionable conduct to avoid being exploited and so that you can report unconscionable conduct.  

If you’re a business owner and you’re unsure whether the practices of your business constitute unconscionable conduct, you should hire a lawyer for legal advice. 

Similarly, if you’re a consumer and you’re unsure whether the conduct of a business you have interacted with is unconscionable, you can also hire a lawyer for legal advice.

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