Often you see such clauses quoted in support of an argument that a claim for misrepresentation cannot succeed where a contract contains this clause.

But that ain’t necessarily so.  In fact, it ain’t even normally so.

‘Entire agreement’ clauses

Typically they read something like this:

This document is the entire agreement between you and us and you acknowledge that we have made, and you rely on, no promise, representation or warranty to you that is not set out expressly in this document.

What they are supposed to achieve

In theory, an ‘entire agreement’ clause prevents you from claiming that you relied on something a salesperson told you, or otherwise sits outside the document.

But the law sidesteps them with ease

The law sees it this way:  If a person was told something misleading that caused them to decide to enter a contract, then their entry into the contract was obtained ‘on false pretences’.  That taints the contract from the moment of its inception.  It is, and always was, a contract obtained by misrepresentation.

So, when the law comes to the ‘entire agreement’ part of that tainted, flawed contract it reasons that it cannot operate as its black & white words suggest it does.  It simply won’t be enforced so as to wipe out the misrepresentation.

So are ‘entire agreement’ clauses irrelevant ?

No, they can have effect.

In deciding whether a person was induced into entering a contract by some external misrepresentation, the court must decide:

• what was actually said or otherwise represented
• whether it was true or false
• if it was false, whether the person would not have entered the contract has they known the truth.

This third element, often called the ‘reliance question’, is frequently overlooked by lay people.  They think that they can avoid a contract if they can show there was a misrepresentation leading up to it.  But they need to show more: they must show that they relied on the misrepresentation as a material factor in entering the contract.

A court can take an ‘entire agreement’ clause quite seriously as evidence that a person did not rely on some external representation.  It can say ‘We accept that a misrepresentation may have occurred, but in judging whether you relied on it we give weight to the fact that you signed a piece of paper saying that you didn’t.’

A high water mark example

Let’s say you sign a short contract after getting legal advice, and it contains a clear ‘entire agreement’ clause.  A court might well say:

• it’s a short contract
• the clause is clear
• you obtained legal advice
• you actually signed the document
• you must have very clearly considered the clause and chosen to assent to it -

so we are satisfied that you did not rely on the external representation you now complain about.  We accept that it was made, and that it was untrue.  But in all the circumstances including the ‘entire agreement’ clause, we don’t accept that you relied on it.

An example at the low water mark

At the other end of the scale, let’s say you sign up for a mobile phone service in store.  The provider uses a Standard Form of Agreement, which you don’t actually see before signing up.

Even if you did see it, it would be dozens of pages long and the ‘entire agreement’ clause is buried on page 24.

The only ‘advice’ you get about the deal is from the commission salesperson.

In those circumstances, if you can later point to a material misrepresentation, the court will sidestep the ‘entire agreement’ clause in a blink.  You did not carefully and consciously assent to the proposition that there was nothing more to the deal than what’s in black & white.

Section 18 of the Australian Consumer Law

This must be the most quoted piece of consumer law on CSP Central.

A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

In virtually every section 18 claim that involves a contract, there is an ‘entire agreement’ clause.  If such clauses could lock out misrepresentation claims, there’d be very few contract cases based around section 18.  (You should be aware that, until 1 January 2011, a nearly identical provision appeared in the old Trade Practices Act 1974, which has since been upgraded and re-named the Competition and Consumer Act 2010.)

But just take a stroll through these cases and you’ll see how many there have in fact been.

Myth busted

‘Entire agreement’ clauses can be important and effective.  But especially in consumer situations where the deal moves fast, the contract is not focused on and there’s no independent advice, they are no sure defence to a misrepresentation or section 18 claim.

This myth is based on a misunderstanding of the process behind codes and the reasoning behind the process.

Communications Alliance Codes sure aren’t just voluntary.

The confusion arises because the Telecommunications Act tries not to be heavy-handed on this topic.  But there’s a gloved hand not far away.

The process

The Act allows for industry codes to be worked out by an industry group, and then submitted to ACMA.  If ACMA approves the code, it registers it.

After that, the hope is that CSPs will fall into line.  And it’s true that there’s no immediate penalty if they don’t.

What if an ISP won’t comply with a code ?

Once a code is registered, section 121 of the Telecommunications Act allows ACMA to issue a direction to a CSP to comply with it.

A breach of a direction then becomes a breach of the Telecommunications Act as well.

After that, failure to comply isn’t healthy for the CSP.  Penalties for breaching an ACMA direction to comply run up to attracts penalties of up to $250,000 for companies and $50,000 for individuals who are involved.

Are ACMA directions common ?

ACMA only issues directions when a CSP won’t ‘voluntarily’ comply.  Even then, it probably only acts on the basis of customer complaints.  The code scheme is indeed intended to be ‘light touch’.

But for instance, in February 2008 ACMA directed Dodo to comply with the complaints handling and billing codes.  This followed a TIO request to look at Dodo because of a rising number of complaints it was receiving.

Quoting from ACMA’s media release:

Industry codes bind industry participants to agreed processes and behaviours that should result in improvements in consumer’s experience with the telecommunications industry.

ACMA will take all steps necessary to ensure that consumers receive appropriate and adequate protection and that industry participants are meeting their obligations.

So, ACMA certainly believes its codes are ‘the law’

This is a myth that should be thoroughly buried

The myth is widespread, and some amateur ‘experts’ loudly assure novices that CSPs can’t be held to account for code non-compliance, since the codes are ‘just industry codes’.

We’ve also seen arguments that the codes only apply to telcos (and not ISPs) or vice versa.  Nonsense.  Unless a code specifically says otherwise, ‘CSP’ means a ‘carriage service provider’ i.e. a telco and / or ISP.

Finally, we’ve seen people advising others that codes only apply to telcos that hold carrier licences.  Bunkum.  A ‘carrier’ and a ‘carriage service provider’ are different things.  Sure, many carriers also act as CSPs, but not all CSPs are carriers.  In fact, most of them are not.

Misinformation is unhelpful

The problem with this myth is that it discourages aggrieved customers from asserting their code rights.  So they don’t complain.  So TIO / ACMA never get the full picture.  So the CSP gets away with non-compliance.  So the ‘experts’ assume that the codes are voluntary, and advise more aggrieved customers accordingly.

It’s time to start giving out accurate information about the codes and their status.

For consumer and small business contracts, that simply isn’t true.  If there’s nothing more to it, the credit management rules in the Telecommunications Consumer Protection Code preclude a CSP from immediate action.

Not much commentary required on this one … we’ll let the TCP Code speak for itself.

CSP obligations before disconnection

A Supplier must:

(a)    make reasonable attempts to Inform a Customer of a decision to Disconnect the Customer’s Service, at least 7 Days prior to Disconnection;

(b)    in Informing the Customer:

(i)    indicate the earliest date on which the Disconnection could occur; and

(ii)    include the date of issue of the correspondence, if they are Informed in Writing;

(c)    at the Customer’s request, promptly review its decision to Disconnect;

(d)    send a separate Disconnection notice, not just a Bill, in Writing to the Customer prior to Disconnecting the Service, unless the Customer was previously advised in Writing under clause 7.4.7 or 7.4.9(a);

(e)    prior to Disconnecting, make reasonable attempts to Inform the Customer and any Guarantor:

(i)    of all consequences to them of non-payment;

(ii)    that default information may be used for internal purposes;

(iii)    of any process enabling Customers to arrange a repayment plan for outstanding amounts following Disconnection, prior to the Supplier commencing external recovery or legal action;

(iv)    in Writing that:

(A)    their telephone number may no longer be available after Disconnection;

(B)     default information may be disclosed to external parties or a Credit Reporting Agency;

(C)     the debt may be referred to an external collection agent; and

(D)     legal action may be taken to recover the unpaid debt.

Got it ?  Instant disconnection is not a standard option.

CSP obligations before suspending or restricting service

A Supplier:

(a)    may only Suspend or Restrict a Service without Informing the Customer if the Supplier:

(i)    assesses that the Customer or the account status presents an unacceptably high credit risk to the Supplier; or

(ii)    reasonably suspects Fraud or attempted Fraud.

And in case you were wondering:

‘Inform’ means advise:

(a) in Writing; or

(b) verbally and confirm and record to provide an auditable record.

‘Writing’ means a document sent by the Supplier to the last known:

(a)    address; or

(b)    email address or facsimile number the Customer has agreed to use instead

of the Customer or, where relevant, the Guarantor, in the Supplier’s records.

So there’s a lot more to it than (to paraphrase some ‘knowlegable’ Whirlpool user) if you don’t pay on time they’re entitled to cut you off.

Many ISP and telco contracts contain a term to the effect that the service provider can change the contract at will.  It’s normally followed up by something like ‘so you must check this T&C page frequently.’

The truth:  In consumer and small business contracts, this kind of term isn’t permitted.

A typical example

Consider these clauses, from TPG‘s current standard terms:

The Customer agrees to be bound by TPG’s Standard Terms and Conditions as displayed at the TPG Internet web site www.tpg.com.au. The Customer understands that TPG’s Standard Terms and Conditions can be amended from time to time and the Customer should visit the TPG Internet web site regularly to be aware of any changes.

Customers should note that these Standard Terms & Conditions and the additional Package Conditions may be revised at any time by way of update on the TPG Internet web site – www.tpg.com.au. Customers are bound by any revisions as at the date they are displayed and should regularly examine the current Standard Terms & Conditions and the additional Package Conditions displayed on the TPG Internet web site.

What’s the problem ?

Well, there are two.  (And if TPG operated under a Standard Form of Agreement, there’d be three.)

The relevant laws are:

• the Telecommunications Consumer Protection Code
• in Victoria, the Fair Trading Act.

TCP Code

This is a Federal code that applies to contracts between ISPs / telcos and their consumer/ small business customers.

It includes protections against unilateral and immediate contract changes.

Clause 5 of the TCP Code says: ‘A clause in a consumer contract must not be unfair.’  ‘Consumer’ is defined to include small business for this purpose.

Then it goes on to indicate kinds of terms that will be unfair, including terms that:

permit the Supplier to unilaterally amend or vary the characteristics of goods or services, including price, in a Consumer Contract with a Fixed Contract Period without:

(A) at least 21 days Written Notice to the Consumer;

and

(B) offering the Consumer the right to terminate the Consumer Contract within 42 days of the date of the notice without incurring charges, other than usage or network access charges to the date the Consumer Contract ends and outstanding amounts for installation or for equipment compatible with other Suppliers’ services.

There are limited exceptions, but the general rule is clear.  A CSP just can’t say: ‘We can change the deal instantly by changing the web site, and you remain bound by it.’

The Victorian Fair Trading Act

Part 2B of this Act is a statutory rule against unfair terms in consumer contracts.  The regulator Consumer Affairs Victoria (CAV) used this law to punch up AAPT in 2006.

CAV is convinced that a clause which allows uncontrolled unilateral variation of a contract is unfair within the meaning of its Act.  It takes an even harder line than the TCP Code on this point.  It won’t even agree to an exception for minor variations.

If CAV required TPG to change its variation term for Victorian contracts, and TPG refused, you can bet your socks that CAV would take them to court.

The AAPT decision

Victoria’s VCAT Tribunal agreed with CAV on this point.  Here’s the relevant AAPT contract term, and what the Tribunal said about it:

The AAPT term:  ‘We may vary any term of this Agreement at any time in writing. To the extent required by any applicable laws or determinations made by the Australian Communications Authority (ACA), we will notify you of any such variation.’

The Tribunal judgment:  ‘This term is unfair because it permits  AAPT , but not the customer, to change the contract unilaterally. The term has the effect of permitting  AAPT , but not the consumer, to avoid or limit the performance of the contract: see section 32X(a) of the Fair Trading Act.

AAPT  pointed to the fact that it has no mobile phone network of its own, but simply resells services supplied by Telstra, Optus and Vodaphone. Under the terms of  AAPT ‘s supplier contracts, terms may be imposed upon  AAPT  on relatively short notice, which might make it commercially necessary for  AAPT  to seek changes consequential upon new terms imposed on  AAPT.

Be this as it may, it provides no justification for a term as broad as clause 1.3, which permits  AAPT  to vary any term of the agreement, at any time, for any cause.