Formation of enforceable contract
A contract is an agreement between two or more parties that is intended to be legally enforceable. A contract arises when one party makes an offer and the other party accepts. Contracts can be verbal or in writing, and the agreement can take the form of a signed document, a verbal agreement or as a result of clicking an ‘I agree’ button on a website.
Terms and conditions
Sometimes a consumer may complain that they never knew about the terms and conditions attached to a rental contract. This argument will only hold weight if the consumer was never made aware of the terms and conditions, for example if the staff at the office made no mention of them, there were no signs in the office alerting the customer to them, or the page they signed did not include a warning to the effect of ‘I accept the attached Terms and Conditions’.
If the consumer is given the opportunity to read the terms and conditions attached to a contract but they decide not to, and they sign the contract, they are taken to have understood the terms and conditions and are bound by them.
However, certain terms in contracts are held to be invalid, even if the consumer agrees to them.
Common pitfalls in car rental contracts
Unfair contract terms: The Australian Consumer Law regulates unfair contract terms. Unfair contract terms are unenforceable, which means they will be treated as though they never existed. A term is unfair if it:
· would cause a significant imbalance in the parties’ rights and obligations under a contract; and
· is not reasonably necessary to protect the supplier’s business; and
· would cause detriment (financial or otherwise) to the consumer.
Examples of unfair terms:
· A term which makes the consumer liable for things that would normally be outside the consumer’s control;
· A term which allows the company to charge the consumer’s credit card for repairs without giving the consumer notice or an opportunity to dispute the charges;
· A term which purports to avoid liability for the company’s own negligence;
· A term that allows the company to substitute an alternative vehicle without prior notice and without any compensation to the consumer. If the substitute vehicle fails to meet the consumer’s needs, then this terms is likely to be regarded as unfair because the consumer has an inalienable right under contract law to a remedy for any loss caused by the rental company failing to meet the agreed terms of the contract. Examples of loss include: additional running costs incurred by having to use a larger car than the consumer wanted; or if the consumer had booked a large car because they needed to carry more passengers, and the substitute car would not fit that many passengers.
Note that certain terms cannot be determined to be unfair – for example, the upfront price, or the main subject matter of the contract.
Lack of transparency: Terms that are hidden in fine print or phrased in very complex language may cause an imbalance in the parties’ rights and obligations and therefore be unenforceable.
False or misleading representations: Information presented to consumers must not be misleading. This includes all information, including advertising, signs at the point of sale and the contract itself. A common example is overhead damage for truck and van rentals. It must not seem like the customer will be covered for more than they actually are. If a consumer purchased extra cover which is titled ‘total cover’ or ‘comprehensive cover’, it must be made clear if there are exceptions to this. At face value, one would assume that ‘total cover’ would include overhead damage, but if this is not the case, then it must be made clear to the consumer.