The [ir]rational consumer and why we need national legislation governing unfair contract terms

In 2003, Victoria, through Pt 2B of the Fair Trading Act 1999 (Vic), introduced legislation to govern unfair terms in contracts. The Standing Committee of Officials of Consumer Affairs have also recently delivered a discussion paper (Standing Committee of Officials 01 Consumer Affairs, Unfair Contract Terms Working Party, Unfair Contract Terms, January 2004) highlighting the issues associated with the increasing use of one-sided terms by suppliers when imposing standard form contracts on consumers. What this article argues is that legislation of the type introduced in Victoria is needed o~ a national basis, not only because 01 the information asymmetry that exists between the modem supplier and contemporary consumer, but also because the rational purchaser of today, voluntarily exercising their free will, does not seek to fully comprehend the complete contract. In effect, information asymmetry is only part of the problem, disclosure not assisting where market imperfections see no competition on contractual terms. Once the case for national intervention is made, a set of principles is outlined to guide future legislative reform.