Protections that previously existed for ‘door to door’ and telephone sales are now covered by the Australian Consumer Law as unsolicited sales, or “unsolicited consumer agreements”.

Under the Australian Consumer Law, an unsolicited consumer agreement has the following characteristics:

[Competition and Consumer Act 2010 (Cth) Schedule 2 s 69].

To be covered by the protections of the Australian Consumer Law it is essential that the supplier make the first approach to the consumer. This may be by phone, by letter (addressed to the consumer) or in person at the consumer’s home, work or any place where the trader normally does not do business. If the consumer contacts the trader first and invites the trader to her or his home, any contract entered is not an unsolicited consumer agreement.

It can be difficult in certain circumstances to determine whether the consumer is the one who has initiated contact but the provisions of the Australian Consumer Law ensure that where there is any dispute there is a presumption that the agreement is an unsolicited consumer agreement and the onus is on the supplier to prove otherwise [Competition and Consumer Act 2010 (Cth) Schedule 2 s 70].

Examples of unsolicited consumer agreements include when a supplier:

More complicated examples include where a consumer invites a supplier to provide a quote for the supply of goods and services. This contact in itself is not an unsolicited consumer agreement so that if a supplier attempts to enter into negotiations to sell a product or later attempts to contact a consumer to do so, the resulting agreement would be considered an unsolicited consumer agreement. If, however, a consumer approaches the supplier after they have provided a quote to accept it or negotiate different terms, this would not be classified as an unsolicited consumer agreement.

Party plan sales

Party plan sales are specifically excluded from the definition of an unsolicited consumer agreement. The circumstances that meet the criteria for a party plan event are set out in Part 6 of the regulations to the Competition and Consumer Act 2010 (Cth).

Consumers must attend an event on the understanding (express or implied) that the purpose of the event is to negotiate for the sale of goods or services to one or more people and three or more people must be invited (although not necessarily all must attend). Finally, the inviter (presumably this means the seller or the seller’s representative, although it is not clear) must be in the same premises as the consumers.

Permitted hours for negotiating an unsolicited consumer agreement

A supplier must not call on a consumer for the purpose of negotiating an unsolicited consumer agreement or for a related purpose [ Competition and Consumer Act 2010 (Cth) Schedule 2 s 73].

Disclosure of identity and purpose

Suppliers are required to clearly advise as soon as is practicable and before they begin negotiations, that their purpose is to seek agreement to a contract for the supply of goods and services. They must also provide details as to their identity i.e. a name and address [s 74].

Suppliers are obliged to leave premises immediately if asked to do so and prohibited from further contact for at least 30 days [s.75].

Penalties can be imposed for suppliers who breach these provisions.

Cooling off rights

Consumers have the right to terminate an unsolicited consumer agreement, either orally or in writing, within 10 business days of negotiating the agreement [s.82]. This is referred to as a ‘cooling off’ period. During the cooling off period the supplier must not supply any goods or services or accept payment from the consumer [s 86].

Where an unsolicited consumer agreement is terminated within the cooling off period the agreement is taken to have been rescinded by mutual consent and is void.

If goods have been provided the consumer must return any goods not consumed or arrange for the supplier to collect them within a reasonable time [s.85]. If the supplier fails to collect the goods within 30 days after having received notice of termination of the contract then the goods become the property of the consumer [ s 85(2)].

The consumer will be liable to pay compensation if they return goods in a less than reasonable state. However, they will not be responsible for any damage or depreciation that occurs in the course of normal use of the goods or as a result of circumstances beyond their control.

If services have been provided before the contract has been terminated the consumer can be required to provide payment for the services provided [s 85(6)].

Cooling off for other reasons

In certain circumstances the length of the cooling off period may be extended.

If the seller or their representative:

the cooling off period is extended to 3 months from the day after the signing of the contract [s 82(3)].

If the seller or their representative:

the cooling off period is extended to 6 months from the day after the signing of the contract [s 82(3)(d)].

*Since 2012 if the total contract price is less than $500 and the supply is for goods only, the purchaser may receive some or all of the goods.

Borrowing to purchase unsolicited goods or services

Consumers may purchase goods or services under an unsolicited consumer agreement by way of credit provided by a third party credit provider. The Australian Consumer Law makes no provision for the termination of credit contracts associated with the purchase of unsolicited goods or services where a consumer exercised the right to cool off, notwithstanding that the consumer agreement is void on cooling off and other related contracts are also automatically void [Competition and Consumer Act 2010 (Cth) Schedule 2 s 83].

Part 7 of the National Credit Code (NCC) provides for the termination of applicable credit contracts where a consumer terminates a contract, either by cooling-off or for some other reason. Note that Part 7 of the NCC does not only apply to unsolicted consumer agreements, but also applies to the termination of any type of consumer contract.

In order for the provisions to operate, certain conditions must be met:

A “linked credit provider” is a credit provider:

A tied continuing credit contract might be a credit card or overdraft facility, the provider of which is linked to the supplier [s 127(2)]. Using a normal credit card or overdraft to pay for the goods or services is unlikely to be caught by this provision.

A tied loan contract is a loan contract where the credit provider knows or ought reasonably to know that the consumer entered into the contract for the purpose of purchasing the goods or services supplied by the supplier and, at the time of the contract, the credit provider was a linked credit provider of the supplier [s 127(3)].

If the consumer exercises the right to cool off, thereby rendering the consumer agreement void, the consumer is also entitled to:

1. in the case of a tied loan contract – terminate the contract; or

2. in the case of a tied continuing loan contract – a refund of the amount of credit and interest charges paid in relation to that credit [NCC s 135].

The supplier is required to inform the credit provider that the sale contract has been rescinded and failure to do so attracts a criminal penalty [s 135(6)]. The requirement to inform is limited to credit provided in relation to unsolicited consumer agreements.

An entitlement to terminate a tied credit contract may be exercised only by notice in writing by the 'other party to the contract' [s 137]. The other party to the contract is usually the consumer.

There may be situations where the supplier may refuse, neglect, overlook or be unable to inform the credit provider (such as following the appointment of an external administrator or liquidator). Therefore the consumer should act prudently and comply with s 137 at the same time as terminating the sale contract to ensure that the credit provider does not take action in reliance on the tied credit contract.