Legal
Issue No. 19 - October/November 2004
Thats not fair - but is it illegal
by Carolyn Mitchell
Quite often small businesses are at the mercy of larger businesses in their business transactions. Very often small businesses feel that they have been taken advantage of in a transaction because of their lack of bargaining power, expertise or professional advice.
The Trade Practices Act provides some relief to small businesses that find themselves in that situation.
The Trade Practices Act contains three sections dealing with unconscionable conduct in commercial transaction:
- Section 51AC which specifically prohibits one business dealing unconscionably with another when supplying goods or services
- Section 51AB which applies to transactions between businesses and customers
- Section 51AA which prohibits businesses dealing unconscionably with each other in all commercial situations, not just when buying or selling.
This article will look at the sections dealing with business transactions, Sections 51AC and 51AA.
Unconscionable conduct is conduct that "shows no regard for conscience; irreconcilable with what is right or reasonable" - Shorter Oxford Dictionary.
Unconscionability is not expressly defined in the Act, but the Act sets out guidelines as to what may constitute unconscionable conduct.
Under section 51AA, unconscionable conduct is likely where one party to a transaction suffers from a special disability or disadvantage that the other party is aware of, and the other party takes advantage of its stronger position to benefit itself.
This will occur in situations such as where a stronger party unfairly exploits the weaker party's disadvantage, the weaker party relies on a misrepresentation by the stronger party or the weaker party is unable to understand the transaction due to lack of experience or professional advice.
There are of course many instances in which such conduct may occur and the application of section 51AA continues to develop.
Under section 51AC, ...
