Changes to Ts and Cs


Can a business change the terms and conditions of your contract?

closeup of GoGet car

Free to fee?


Ever been notified by email about a change to the terms and conditions of one of the services you're signed up to? Probably. And if you've taken the time to read one of these emails, you'll notice they usually imply that now the email has arrived in your inbox, you accept and consent to the changes, whether you actually do or not.

But what happens when the changes to the terms and conditions are significant? Say the price of the service you're subscribed to is going to increase, or perhaps all of a sudden you're going to be charged a fee for using a service that was previously free? Is it really reasonable to expect you to just agree to those changes without formally accepting them?

This is exactly what happened to a group of GoGet customers who'd signed up to the car share service on the proviso that there would be no annual fee, among other examples.

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GoGet's pricing changes

In 2015, GoGet emailed customers on this plan saying they would soon be charging a $49 annual fee to be a member of the service. Why? GoGet told us it felt it "would more fairly reflect the cost of running a carshare service". If you were happy with the charge, you didn't need to do anything, but if you weren't, and wanted to cancel, you needed to contact the company to let them know.

GoGet says it sent multiple emails and also followed up with an SMS. But as you can imagine, some customers will no doubt miss these memos (we spoke to someone who did) – maybe because the email system fails, the spam folder eats it, or it just gets lost among the plethora of other emails. All of a sudden there's a situation where customers who are unaware of the changes are being charged for a service they thought was free. To be clear, GoGet didn't necessarily do anything it wasn't allowed to do under the law, and did refund those who contacted them about their concerns. 

It's also worth noting that changing prices is something many businesses do in some form or another – CHOICE itself has a clause in its terms and conditions which allows us to increase our prices from time to time (and we have done so), on the proviso we let customers know beforehand. Nevertheless, the anecdote does raise questions about whether we as consumers think it's reasonable for a business to up and change its terms and start charging fees that weren't part of the original deal, particularly given we as consumers aren't able to do the same in return. Imagine what a business would say if you sent them an email saying that in 30 days, you would be paying less for the service (just because) and that unless they chose to terminate the contract, the changes would stand. 

Can businesses just change their terms and conditions? Do they have to notify me?

It's probably unrealistic to expect that a business offering long-term subscription services will never need to change its pricing structure. But, what if you've signed a contract – can a business just change its terms and conditions? Well, yes and no. There are no precise rules under Australian Consumer Law preventing service providers from making changes to terms and conditions per se, however there are certain parameters around how changes can be made, namely that any variation clauses can't be unfair.

Contract is key

The key is in the contract with the service provider. Jeannie Paterson, associate professor at Melbourne Law School at the University of Melbourne, says that under contract law a business can't just renegotiate a contract – they need to negotiate a new deal. However, read through almost any contract for a subscription service and you'll probably find a clause which allows the business to vary the agreement, particularly in relation to price. Such clauses will likely also come with qualifications allowing you to cancel the service if you don't agree to it, and a clause advising that you'll be notified of such a change, or risk being deemed unfair.

In short, a business can make changes to a contract on the proviso that such variations are written into the original contract and that the term isn't unfair, which will likely require it to be coupled with an obligation to notify you as well as offering you the ability to cancel or opt out.

How will they notify me?

As for how the notification of changes to a consumer contract need to be provided – such as how much notice needs to be given, how the notification should be sent, and whether a business actually needs to obtain your express consent – it's a little less clear. "Unfortunately in Australia there isn't any guidance, it's a real shame," says Paterson.

Banking and finance

The banking and finance sector is one of the few industries that does provide clear guidance on how allowable changes to a contract need to be communicated. The National Credit Code (NCC), which covers credit contracts such as mortgages and credit cards, sets out the minimum amount of notice that needs to be provided for unilateral variations (such as interest rate rises and fee changes) as well as the means by which this should occur. The Australian Banking Association's Code of Banking Practice along with the Customer Owned Banking Association's equivalent and the ePayments code, also offer guidance for the banking and finance sectors on how changes to terms and conditions should be communicated. 

However, unless prescriptive codes such as these are in touch with consumer habits, they're unlikely to be particularly helpful. Take for example, the providers of the 28 Degrees Mastercard, who in July 2016 changed their terms to introduce a $0.95 payment handling fee for BPAY payments. They were able to adhere to legal requirements under the NCC by placing an advertisement about the fee change in a national newspaper (in this case The Australian) and by notifying customers in their statements. 

If the online furore from those finding out about the change only once they were charged the fee is anything to go by, it would seem that, unsurprisingly, people don't read their online statements or the notifications section of the national newspaper. Perhaps a clear and succinct email outlining the change sent directly to the customer – potentially even asking them to confirm or reject the changes – would be a better means of notifying people?

Beyond the banking sector, guidelines about how you should be notified of changes to terms and conditions are scarce – something which becomes apparent when you take a look at a range of service contracts.

Streaming service contracts

Take for example, streaming services such as Stan, Netflix and Foxtel Play. The terms and conditions allow for prices to change providing they give notice (the amount each one offers varies somewhat). In addition, the communication methods for notification vary. Netflix and Stan specify they will provide notice via email only, while Foxtel Play says it may provide this notice by any of the following methods: "by contacting you directly, including by SMS or email" or "via the Foxtel Website or the Foxtel Play Service".

Energy contracts

Energy contracts are another culprit for variation clauses. Even under the model terms and conditions set by the National Energy Retail Rules, prices can change once every six months. Energy retailers' standard form contracts, where they set the terms and conditions, must read: "If we vary our standing offer prices, we will publish the variation in a newspaper and on our website at least 10 business days before it starts". That's great for those who love spending their spare time surfing their electricity provider's website but not so great for everyone else. Luckily, your retailer also needs to "include details with your next bill if the variation affects you" – but perhaps a bit late if you were hoping to change providers as a result of the price change. 

It's a similar story with market contracts, where energy retailers are able to set their own terms and conditions, provided they are in line with certain rules. These rules require that to change electricity prices, retailers must notify their customers of any changes. As for how much notice they need to provide? "The notice must be given as soon as practicable, and in any event no later than the customer's next bill".

Do they need to reauthorise my credit card?

If businesses are able to just change the price on you, you might think they would need to reauthorise any deductions from your account. The ePayments Code defines an unauthorised transaction as "a payment that is not authorised by a user". So if you haven't expressly reauthorised a payment, will it be treated as an unauthorised payment? It seems unlikely.

Provided you've authorised a deduction in the beginning, say when you signed the contract, be it through direct debit or credit card, there doesn't seem to be a requirement to reauthorise a payment if the price changes. For example, with direct debits, if the contract terms say that the price may vary then there's no requirement to obtain reauthorisation for the variation in payment. It's a similar story with credit cards. 

In response to whether a service provider needed to reauthorise payments when the price changed, an AMEX spokesperson told us: "It's really the merchant's responsibility. As the credit card provider we are not privy to what pricing arrangements the customer has with the merchant (in this case, service provider) and if pricing has varied over time".

The way forward

As it stands businesses seem to be able to change contract terms provided they include variation clauses with sufficient qualifications (such as the right to cancel and providing notice) in order to avoid being deemed unfair. However, variation clauses in consumer contracts are inherently unfair, argue Paterson and co-author Rhonda Smith, also from the University of Melbourne, in an article published in 2016. Their reasoning being that while parties to a commercial contract are able to weigh up the risks associated with a variation clause and negotiate a better deal off the back of it, consumers signing standard form contracts are less likely or unable to do so.

Better notification guidelines would be one step, but Paterson argues that the rules regulating changes to contracts should be stricter. Rather than using blanket variation clauses, the default should be that changes are only justified in certain circumstances. Ideally, any potential changes should be defined in a contract and limits should be placed on the magnitude of the change, says Paterson. 


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