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HIRE AND RENTAL NEWS • AUGUST 2016
INDUSTRY in FOCUS
where the underbody or overbody of
the car was damaged, where there was
water damage, or in circumstances where
the customer breached the car rental
agreement.
Not only would the customer be fully
liable for the loss or damage in an
unlimited amount in these circumstances,
but the terms of the car rental agreement
allowed Europcar to impose liability for
damage on the customer even where it
was not the customer’s fault at all.
The Australian Competition and
Consumer Commission (ACCC) sought
declarations Europcar had entered
into standard form contracts with its
customers that contained unfair terms.
The court found the existence of the
relevant terms resulted in a significant
imbalance in the parties' rights because
they improved Europcar’s position
relative to its customer and the terms
would cause detriment to the customer if
Europcar relied on them.
Europcar did not show why the relevant
terms were reasonable to protect its
interests and the court ultimately
found them to be unfair terms. The
result was a total of 14 terms in the car
rental agreement were declared void.
In addition, Europcar was required to
publish a corrective advertisement for a
period of 21 days, pay the ACCC’s costs of
$65,000 and pay a penalty of $100,000.
The impact on hire businesses
In our experience, many hire businesses
don’t adequately identify the risks they
really need to exclude and instead use
the broadest possible drafting, imposing
harsh and inflexible terms in the process.
Consequently, many hire agreements
have broad damage waivers like the one
in Europcar as well as other unfair terms
which are likely to breach the Act.
It is likely also many customer-facing
hire business personnel do not have a full
appreciation of the effect of some clauses
and may be inadvertently misleading or
incorrectly reassuring customers which
could lead to other legal problems.
As illustrated in Europcar, this can have
a significant impact. A term identified
as unfair will be declared void and if
the contract is not capable of operating
without that term, may result in the
entire contract or parts of it being
unenforceable. In the most serious cases,
the use of unfair terms may result in court
proceedings brought by the regulator and
significant financial penalties.
Hire businesses should therefore review
their customer terms and conditions and
identify the terms that may be in breach
of the law, as well as provide adequate
training to personnel.
There is however some good news in all
this.
The law does not prohibit a term that is
reasonably necessary for the protection of
your legitimate interests.
By identifying the key risks facing your
business and carefully considering
how to protect against those risks in a
reasonable manner you can significantly
reduce the risk of breaching the unfair
contracts regime.
Your terms may well become shorter,
more readily understood by customers
and therefore easier to put in place.
And when the boot is on the other foot –
if you are a small business entering into
a cross-hire agreement on the customer
side, or any other agreement – then you
will be protected from some of the unfair
and one-sided terms that are out there.
For further information contact Oliver
Shtein, Michael Cossetto or Michael
Muratore on ph: 02 8281 7949 or visit:
www.bartier.com.au
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Web:
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