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What is Unconscionable Conduct? (2020 Update)

What is Unconscionable Conduct? (2020 Update)

Unconscionable conduct is conduct which is deemed unconscionable in line with general social standards. Find out more here.

11th March 2020

Is it illegal to induce a non-English speaking person to sign a contract written in English? What about to deliberately convolute terms in a contract to create a sense of confusion and unnecessary pressure? The courts may consider these actions to be unconscionable conduct and therefore punishable by law. Further, these rules apply to businesses in the way that they interact with customers. In this sense, it’s important to understand what unconscionable conduct is and how to ensure your business is acting ethically. In this article we’ll be covering what unconscionable conduct is, and provide some common examples of it. 

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What is unconscionable conduct?

Unconscionable conduct is a statement or action that is considered so unreasonable that it “defies good conscience”. The definition is so general because there is no precise definition of unconscionable conduct at law.

It’s designed to be this broad to capture all the creative ways businesses can go about making a sale. The courts have ruled that to be considered unconscionable, the conduct must be more than simply unfair – it must be against good conscience as judged by societal norms. For example, courts have held that inducing an alcoholic to drink a bottle of rum while entering into negotiations defies good conscience.

Along with the courts, there are some provisions under the Competition and Consumer Act 2010 (Cth) that also govern unconscionable conduct.

The law prohibits unconscionable conduct when:

  • Selling or supplying goods and services to a customer; or
  • Supplying or acquiring goods and services to or from a small business.

This means that it can happen in any ordinary transaction, at any time.

Examples of unconscionable conduct

When deciding whether conduct is unconscionable or not, the court looks at a number of factors on a case-by-case basis. Despite this, there many examples of where conduct has amounted to being unconscionable, such as: 

  • If one party has lesser bargaining power than the other
  • Not allowing a customer or business enough time to read a contract
  • Not giving a party to a contract an opportunity to seek advice or ask questions about the terms of the contract
  • Compelling someone to sign a blank agreement
  • 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
  • Using a friend or relative to influence the consumer’s decision

These all revolve around engaging in conduct which exploits the person on the other side. Whether this is due to a language barrier or someone not understanding their rights – both are harsh and oppressive measures that are not acceptable by societal standards. However, it’s important to note that is not an exhaustive list and the court can consider any circumstances that are relevant to the case, or appear to be unconscionable. 

Good faith

Good faith is an important legal element that is present in many aspects of business. This includes when negotiating contracts. Good faith means to do something with honest and fair intentions. If a party does not act in good faith when dealing with businesses or customers, it can be considered unconscionable conduct.  

What consumers should look out for

Unconscionable conduct affecting consumers is covered under section 21 of the Competition and Consumer Act 2010 (Cth) . As a consumer, it’s important that all commercial agreements are in writing, that you fully understand all the terms and don’t sign any agreement without reading them all carefully. Having something in writing will protect you if you need to take legal action. If anything in your contract is unclear, always be sure to ask for plain language explanations as jargon can be confusing. If you’re still feeling unsure, seeking independent legal advice can be helpful. Lastly, if you feel like someone is forcing you into signing something – don’t do it. If it doesn’t feel right, then it’s best to hold off on signing anything until you’ve cleared up anything you’re not sure about. 

What small businesses should look out for

Unconscionable conduct affecting small businesses is covered under section 22 of the Competition and Consumer Act 2010 (Cth). Business behaviour may be considered unconscionable if it is harsh or oppressive to an extent that it is beyond “tough commercial bargaining”. Businesses should be careful not to exploit the other party when negotiating, especially when they have weaker bargaining power. Further, you should explain the contract to the other party and ensure that they understand their obligations. Above all, if things go wrong, be willing to resolve the issue and negotiate. 

Conversely, if you’re negotiating with a larger business, make sure you understand the terms of the deal you’re getting into. If you don’t, it’s important that you seek legal advice on what clauses in the contract mean. Key terms include terminating the agreement, payment, deadlines, and who is liable if the terms of the contract aren’t fulfilled. Although it may be difficult, try not to be cajoled into signing anything you’re not ready to. signing on the spot is rarely a good idea, especially where you have not had adequate time to measure your own interests against what is in the contract. 

What happens if my conduct is unconscionable?

The ACCC deals with cases of unconscionable conduct. Remedies such as compensation, voiding the contract and financial penalties are just a couple of examples of what can happen. If your business is caught engaging in unconscionable conduct, it’s likely that you’ll be slapped with a heavy fine. 

Final Thoughts

Many businesses can engage in unconscionable conduct without even realising it. However, what can seem like persuasiveness or creative promotional tactics can actually be illegal. For consumers, you should never rush when making a decision and try not to be persuaded by a convincing sales pitch. For businesses, let your persuasiveness remain at an ethical level and let the quality of your service or product do most of the talking. If you’re not sure where the line is when it comes to making sales, then it’s a good idea to consult with a business lawyer.

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Author
Tiana Podinic

Tiana is a Paralegal, working in our content team, which aims to provide free legal guides to facilitate public access to legal resources. With a strong interest in commercial law, her research focuses on the revolutionising legal sphere and the implications for all involved.