Check before you tick – what am I agreeing to?

With the evolution and development of information technology, contracts executed online have become more and more common.  ‘Click-wrap’ agreements are an example of this development, where a user ticks a box (or something similar) online to indicate that they accept certain terms and conditions. But how many of us have really read through those terms and conditions and know what they are binding us to?

You do not need to put pen to paper to be bound by a contract. Contracts can be formed by verbal agreements or implied during a course of dealings between parties. These days contracts can be entered into in a virtual environment even over Microsoft Teams; Zoom; or using electronic signatures. If you express your agreement to a document which you know has contractual terms (i.e. through signing, or ticking a box), you will be bound by those terms even if you have not read through them. Unless the terms are void or unenforceable all of them will apply.  It is not a defence to a claim for the enforcement of those terms to say that you have not read the document.[1]

Earlier this year, Michael Hill Jeweller (Australia) Pty Ltd (Michael Hill) received a timely reminder of this by the Supreme Court of New South Wales, with the Court awarding $2.2 million in damages against Michael Hill.[2]

What happened in that case?

The facts of the Michael Hill case are as follows:

• Gispac Pty Ltd (Gispac) was a supplier of paper bags and other packaging materials.
• Michael Hill Jeweller (Australia) Pty Ltd (Michael Hill) is a well-known retailer of jewellery and accessories.
• Gispac and Michael Hill entered into three separate Sales Agreements (the Agreements), for the supply of wholesale packaging. Under the Agreements, Gispac supplied wholesale packaging in the form of carry bags to Michael Hill from around 2003 to May 2018.
• The Agreements contained the following term, with the box ticked in handwriting: “Please tick to confirm that you agree to agree to the terms and conditions that can be found at the following link….” When Michael Hill’s Group Distribution Manager had signed the Agreements, he did not read through all of Gispac’s terms and conditions (the T&C).
• The T&C provided, amongst other things, that Michael Hill was required to purchase an annual quantity of packaging.
• Gispac claimed that it’s standard T&C formed part of the Agreements, and on 17 May 2018, issued Michael Hill with three “Debt Notices” amounting to $2,261,676.20 (excluding GST). The Debt Notices claimed the difference between the amount of packaging purchased by Michael Hill and the required annual quantity (per the T&C).
• Michael Hill denied that the T&C formed part of the Agreements and did not pay Gispac on the Debt Notices.

The Court held that Michael Hill had agreed to be bound by the T&C when its representative signed the Agreements and ticked the box, regardless of whether they had read and considered the T&C.  The Court concluded that the T&C formed part of the Agreements and Michael Hill was liable to pay for the annual quantity required by the T&C.

What does this mean for me?

This case stresses the importance of making sure you read all the terms of a contract including any applicable terms and conditions before ticking an acknowledgement box.  Once you enter a contract, you will be bound by all the terms and conditions, unless you can prove that its terms (either in full or part) are void or unenforceable. Not having read them all is not a defence.

How can I show a term(s) is void or unenforceable?

A contract may be voidable if undue influence; duress; misrepresentation; or fraud was present when the contract was made. Generally, these sorts of factors are not present when entering into standard terms and conditions online.

Despite this, as terms and conditions (particularly those online) are commonly issued on a ‘take it or leave it’ basis, they may be likely to cause disadvantage to you as a consumer.

The unfair contract term (UCT) regime in Australia was introduced to protect you in this situation. The UCT regime prohibits the use of unfair contract terms in contracts that are:

• small business or consumer contract; and
• in a ‘standard form’

If a term is in breach of the UCT regime, it will be found by a court or tribunal to be void and unenforceable.  Significant penalties can apply to anyone seeking to rely on an UCT.  To determine whether a particular contract (including any terms and conditions) falls under the operation of the UCT regime requires consideration of the overall circumstances of its creation.  In determining whether a certain contract is in a ‘standard form’, the court or tribunal is required to consider whether:

• one party had all or most of the bargaining power;
• one of the parties has made another contract, on the same or substantially similar terms and, if so, how many contracts that party has made;
• the contract was prepared before discussions occurred between the parties;
• one party was given an effective opportunity to negotiate the terms of the contract.

However, please note, if a party alleges that a contract is in a ‘standard form’, it is presumed to be in a ‘standard form’ unless proven otherwise.

How do I know if a term is unfair?

The Australian Consumer Law provides examples of terms that may be unfair, including a term that permits one party (but not another party) to:

• avoid or limit performance of the contract;
• terminate the contract;
• penalise a party for a breach or termination of the contract;
• vary the terms of the contract;
• renew or not renew the contract;
• vary the upfront price payable under the contract without the right of another party to terminate the contract;
• unilaterally vary the characteristics of the goods or services to be supplied, or the interest in land to be sold or granted, under the contract;
• unilaterally determine whether the contract has been breached or to interpret its meaning; and
• assign the contract to the detriment of another party without that other party’s consent.

This is not an exhaustive list, and other terms may be ruled to be ‘unfair’ after considering the terms of the contract.  For further information on the UCT regime in Australia, please see our articles here and here.

Require assistance?

If you require advice regarding options for or implications of terminating a contract, contact the Litigation and Dispute Resolution team at Coulter Legal today.

[1] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52, [57].

[2] Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd [2024] NSWSC 18 (Michael Hill case).