Vehicle hire businesses - unfair contract terms

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Vehicle hire businesses generally use standard form consumer contracts - that is, contracts prepared by the business and offered on a 'take it or leave it' basis.

Under the Australian Consumer Law (ACL), a term in a standard form contract may be declared unfair if it:

  • would cause a significant imbalance in the parties' rights and obligations
  • is not reasonably necessary to protect the business
  • would cause detriment (financial or otherwise) to a consumer.

All businesses, including vehicle hire, should ensure their contracts comply with laws about unfair contract terms.

The ACL bans businesses from proposing, using, or relying on unfair contract terms in standard form contracts with consumers and small businesses. Penalties can be as high as:

  • $50 million for businesses
  • $2.5 million for individuals.

We have worked closely with vehicle hire businesses to remove or modify unfair consumer contract terms, including terms that:

  • give the business the right to vary prices and other terms and conditions but do not allow the consumer to cancel the contract without penalty (for example, a term allowing the business to supply a vastly different substitute vehicle if the one booked is not available)
  • require the consumer to acknowledge that the vehicle is in sound mechanical condition when it is collected. For more information, view Vehicle condition.
  • contain restrictions on the use of the vehicle that would be part of its normal and reasonable use
  • make the consumer liable for pre-existing damage, for fair wear and tear or for damage from causes beyond their control, including damage occurring after the vehicle has been returned
  • allow the business to exclude or limit the liability of its staff. For more information, view Disclaimers covering staff.
  • allow the business to make charges to the consumer's credit card for things that happen after they have returned the vehicle (for example, a term stating that the hire charge will continue until the business completes the final inspection, if the vehicle is returned outside of business hours). For more information, view Credit card payments.

Contracts that include such terms are not automatically considered unfair. We do not decide whether a term is unfair; only a court or tribunal can decide this.

Consumers may take action at the Victorian Civil and Administrative Tribunal (VCAT), or in a court, if they believe a term is unfair. If a court or tribunal finds a contract term to be unfair, it is considered void and treated as though it never existed. If the contract can operate without the unfair term, it will still be binding.

We work with businesses to ensure their contracts comply with the law. If a business refuses to modify its contracts, we may take further action such as applying to VCAT for a ruling.

Vehicle condition including maintenance, security and safety

Many vehicle hire contracts require the consumer to acknowledge that the vehicle is in good order, clean and in roadworthy condition when it is collected. While the consumer can see whether the vehicle is reasonably clean, they cannot know its mechanical or safety condition (roadworthiness).

Vehicle hire businesses are responsible for the maintenance and general up-keep of vehicles before they are hired, including ensuring they are roadworthy.

Disclaimers covering staff

In many cases, consumers rely on the advice and actions of agents and employers in finalising vehicle hire contracts. It is unfair if the consumer suffers loss or damage due to information provided by staff, and the contract terms state that the consumer did not rely on any advice or representations made by staff.

Credit card payments

Vehicle hire contracts should only require consumers to authorise known dollar amounts from their credit cards, and not authorise businesses to allow unlimited deductions from consumers' credit cards.

Businesses should notify consumers and gain their authorisation to deduct any unforeseen charges, such as payments for accident repairs.