australia
It’s complicated
Contract Law
This PWC report from March 2023 provides a good summary of the law in new-south-wales, victoria and Federally. It is focused on energy infrastructure but the commercial contract law is pretty universal.
NSW courts have generally held that an obligation for
parties to act in good faith can be implied in all commercial
contracts. On the other hand, Victorian courts have
rejected the notion that good faith should be
indiscriminately implied to override any express provisions
of power. However, Victorian courts have not completely
overruled the need for good faith in certain commercial
situations, especially where balance of power heavily
favours one party.
The Full Federal Court in Virk Pty Ltd (in liq) v YUM!
Restaurants Australia Pty Ltd [2017] FCAFC 190 identified
good faith in terms of conduct that can be deemed to be in
bad faith. It specified that conduct that is:
- capricious
- dishonest
- unconscionable
- arbitrary
- the product of a motive which was antithetical to the object of the contractual power
will be in bad faith.
So, what does that mean?
It means that if the contract gives power to someone to do something, they must exercise that power:
- in good faith if it's under NSW law,
- possibly in good faith if it's under Victorian law,
- not in bad faith if it's under Commonwealth law.
This is all subject to the specific wording of the contract; a contract that gives someone a clear and unfettered power that explicitly excludes reasonableness and good faith, then they can exercise that power however they like. Similarly, one that explicitly requires reasonableness or good faith ... will require the power to be so executed. The implied situations used by the courts above are relevant only when the contract is ambiguous or incomplete; as they often are.
Consumer Law
Or, if it's a contract subject to the unfair contract terms provisions of the Australian Consumer Law, which came into force on 9 November 2023, so there's no case law to clarify them. Unless "citizen X" is able to negotiate the terms of their broadband contract, which would imply they were a major corporation, these provisions will apply because, for most of us, broadband contracts are take-it-or-leave-it.
Contract terms are unfair if they:
- cause a significant imbalance in the rights and obligations of the parties under the contract
- are not reasonably necessary to protect the legitimate interests of the party who gets an advantage from the term, and
- would cause financial or other harm to the other party if enforced.
In deciding whether a term is unfair, a court can consider any matters it thinks relevant but it must consider the contract as a whole and whether the term is transparent.
The law sets out examples of terms that may be unfair, including:
- terms that allow one party (but not the other) to avoid or limit their responsibilities under the contract
- terms that allow one party (but not the other) to end the contract
- terms that penalise one party (but not the other) for breaching or ending the contract
- terms that allow one party (but not the other) to change the terms of the contract.
Something's fishy
One day FastNet LLC cuts the service stating that "Citizen X has violated ours terms and conditions".
Fine, it's probably not unfair to allow a broadband company to cut ties for violations of the terms and conditions; indeed, termination for cause is a longstanding tenant of contract law.
FastNet replies that it is "at its sole discretion to provide or terminate the service".
Fine.
If this is not a consumer or small business contract, then such a provision is fine, subject to any explicit or implied terms of good faith or reasonableness in its implementation. If it is subject to the unfair contract terms regime, providing the customer has a mirroring right to terminate on the same basis, this is OK.
But ... it can't be both! Either they terminated for cause, or they terminated for convenience: they can't have done both at the same time.
What it looks like is they have mistakenly believed they had cause, and when challenged, rather than saying "my bad", they have doubled down and stated a different reason for termination. That starts to look like bad faith, and that's unlawful.
What's next
All telcos in Australia have to have a complaint-handling system, so citizen X will need to follow that process. This will be structured but will not rely on strict rules of evidence or standards of proof; the idea is to find a mutually satisfactory outcome.
If the process fails or citizen X is unhappy with the outcome, their next step is to complain to the Telecommunications Industry Ombudsman, who will try to help.
Finally, you can sue to recover your losses or for an order to restore the service. Of course, for the dollar amounts involved, it's probably not worth it.
If you do go to court, you would be the plaintiff, and it would be your obligation to prove your allegation (that they terminated the service outside the contract terms) on the balance of probabilities, that is, more likely than not. So, each side would present their evidence, and, assuming there is at least some evidence to support the plaintiff's assertions, the judge would determine who they believe more.
