This article follows on from the first two articles in the Offloading the ACL series.

In the first article, we considered whether consumer guarantees can apply to transport and related arrangements, including trailer supply arrangements, and the difficulties in determining consumer status in that context. In the second article, we explored what the consumer guarantees mean in practice for transport providers, including the statutory limits on excluding or restricting those guarantees.

Those articles demonstrated that exclusion clauses in transport contracts already face a number of statutory constraints under the Australian Consumer Law. In particular:

• some consumer guarantees cannot be excluded at all
• section 63 no longer operates as a broad exemption for transport services in the way it once did, introducing uncertainty as to when guarantees apply
• where guarantees apply and limitation is permitted, section 64A requires liability to be limited in a specific and prescriptive manner

A further constraint – The unfair contract terms regime

The unfair contract terms regime introduces an additional and distinct constraint on exclusion clauses.

Unlike the consumer guarantees regime, unfairness does not turn on whether a party ultimately establishes that it is a consumer. The focus is on whether a term in a standard form consumer or small business contract causes a significant imbalance in the parties’ rights and obligations, is not reasonably necessary to protect legitimate interests, and would cause detriment if relied upon.

Transport and logistics contracts are particularly exposed to this analysis. They are commonly standard form. They frequently involve small businesses (and sometimes consumers). And they often contain broad exclusions of liability and rigid claims processes designed to minimise exposure.

As a result, even where a transport provider considers that consumer guarantees do not apply, or believes it has validly structured its limitation of liability in accordance with section 64A, exclusion clauses may still come under scrutiny under the unfair contract terms regime.

The statutory context – The section 25 grey list

Section 25 of the Australian Consumer Law contains a non-exhaustive list of the types of terms that may be regarded as unfair. While inclusion on this list does not mean that a term is automatically unfair, it provides important guidance as to the kinds of clauses that regulators and courts scrutinise more closely.

Of particular relevance to transport contracts is section 25(k), which identifies terms that have the effect of limiting or excluding a party’s right to sue another party. This category captures contractual mechanisms that do more than unfairly allocate risk. It extends to provisions that, in substance, operate to deprive the counterparty of any practical avenue of recourse.

Exclusion clauses and claims processes in transport contracts raise these issues in a particularly acute way.

Broad exclusions of liability and their practical effect

Despite increasing focus on unfair contract terms risk, it remains common to see provisions which state, in substance, that a carrier will not be liable in any circumstances, whether in contract or tort, for loss of or damage to goods, delay or failed delivery, including where the loss is alleged to have been caused by the carrier’s negligence or recklessness, subject only to a general statement that liability is not excluded where it is not permitted by law to do so.

Clauses of this breadth transfer essentially all carriage risk to the customer and absolve the carrier of responsibility for matters entirely within its control. Regulators and courts have repeatedly taken the view that clauses which shift responsibility to the counterparty for matters outside its control, and which sit squarely within the control of the stronger party, are unlikely to be viewed favourably under the unfair contract terms regime.

The presence of a general saving clause acknowledging the operation of the Australian Consumer Law does not materially alter this analysis. While such clauses may address circumstances in which liability for breach of consumer guarantees cannot be excluded, they do little to mitigate unfairness arising from how risk and remedies are allocated for liability under other causes of action, including contract, tort or other statutory obligations.

Procedural exclusion through claims processes

Exclusion clauses in transport contracts are not always framed as substantive limitations of liability. In some cases, they are achieved procedurally.

Claims regimes that require compliance with short and inflexible notification requirements, with failure to comply permanently discharging the carrier from liability, may operate in substance as another form of exclusion clause. Rather than excluding liability directly, arguably they exclude it by process, by extinguishing the right to bring a claim before it can be realistically exercised. This may occur by coupling narrow notification windows with curtailed limitation periods for commencing proceedings.

While framed as administrative requirements, the practical effect is often to deny any meaningful avenue of recourse once those deadlines are missed.

From a practical perspective, loss or damage is not always discoverable within short timeframes. Investigation and substantiation commonly take longer, particularly where damage is concealed, manifests after delivery, or requires coordination between multiple parties. In those circumstances, rigid claims processes do not simply regulate how claims are made. They may also operate as de facto exclusions of liability.

It is, of course, understandable that carriers seek timely notice of loss or damage. Prompt notification assists in investigating what occurred during transit and reduces the risk of claims arising from events outside the carrier’s control. The unfair contract terms issue is not the existence of notice requirements as such, but their design and consequences.

Claims regimes that permanently extinguish rights without regard to when loss could reasonably have been discovered, or whether the carrier has suffered any prejudice, are particularly vulnerable. Viewed through the lens of section 25(k), these mechanisms arguably limit a party’s right to sue just as effectively as an express exclusion clause.

Exclusion through caps and excluded loss provisions

Exclusion clauses in transport contracts may also be effected through monetary caps on liability and exclusions of categories of loss. In many cases, these mechanisms form part of orthodox risk allocation and have not, of themselves, been the primary focus of regulatory enforcement. Appropriately calibrated caps and exclusions may be defensible, particularly where they bear a rational relationship to the services provided and preserve meaningful remedies.

However, where caps are set at nominal levels, or excluded loss provisions operate in combination with broad liability exclusions or procedural barriers, they may function as another form of practical exclusion. In those circumstances, caps and excluded loss clauses can materially restrict real avenues of recourse, even if framed as conventional limitations.

In addition, such provisions cannot displace non excludable statutory entitlements where they apply. Where consumer guarantees apply on a personal, domestic or household basis, and liability cannot be limited under section 64A, a claimant may be entitled to recover reasonably foreseeable loss under the statute, regardless of how liability is capped or loss categories are defined in the contract. Viewed through a UCT lens, the question that should be asked is whether, in context, caps and excluded loss provisions operate to deny meaningful remedies in a way that goes beyond what is reasonably necessary.

Other clauses of concern

In addition to exclusion clauses, section 25 also identifies other types of terms that may appear in transport and logistics contracts and warrant careful consideration. These include clauses that:

• allow one party to unilaterally determine whether a breach of contract has occurred;
• permit unilateral variation of price, services or key contractual terms without a meaningful right to terminate; and
• provide for automatic rollover or renewal unless the counterparty complies with narrow opt out requirements.

Each of these clauses tends to concentrate discretion and control in the hands of the stronger contracting party while limiting the other party’s practical ability to enforce or protect its rights.

Final thoughts

Exclusion clauses have long been a feature of transport contracts and terms of carriage. However, they can no longer be treated as operating largely outside substantive scrutiny.

The combined operation of sections 63 and 64A of the consumer guarantees regime, together with the unfair contract terms regime, means that exclusion clauses must now be justified, not assumed. Transport providers can still manage risk through exclusion and limitation clauses, but those clauses must be drafted carefully, proportionately and with a clear understanding of how statutory rights intersect with contractual risk allocation. In the current regime, exclusion clauses should be used deliberately and with caution. The same discipline should be applied to any contractual terms that may engage the unfair contract terms regime.

How we can help

Our Commercial team regularly advises transport providers, logistics operators and businesses that rely on carriage services on transport and logistics contracts, including risk management and compliance issues across complex supply chain arrangements.

About the author

Teresa Torcasio is a Commercial Partner at HWLE Lawyers specialising in Australian Consumer Law. She advises clients in the transport, logistics and commercial sectors on consumer guarantees, unfair contract terms and liability allocation. Teresa has been recognised by Best Lawyers in Australia in several areas of practice, including Transport Law and Commercial Law.

This article was written by Teresa Torcasio, Partner.