Overview of the Malaysian Position
1. Protections under the Consumer Protection Act 1999
Part IIIA of the Consumer Protection Act provides some form of shield against unfair
terms drafted by suppliers. Section 24A is consistent with the definition of contracts
under the Contracts Act, and Section 24B, states that Part IIIA applies to all
contracts. However, this must be contrasted with the Application provision of the Act,
which under Section 2(1), clearly delineates the scope of the Act to only govern
consumer contracts, and trade transactions.
The Act’s method of governing unfair contract terms is through an approach which
separates both procedural and substantive unfairness. Procedural unfairness can be
understood as unfairness regarding the manner in which the contract was drummed
up, or the process in which it was constructed. Meanwhile, substantive unfairness
relates to the specific nature of the contractual terms which are unfair in either its
purpose or application.
Procedural unfairness is governed under Section 24C, which provides for unfairness
regarding the manner or circumstance in which the contract has been arrived at.
Unfairness in this regard arises where there is either an unjust advantage or
disadvantage to the supplier and the consumer respectively. Subsection (2) the
proceeds to illustrate an exhaustive list of circumstances which the court may
consider in determining whether unfairness exists. Summarily, these factors revolve
around two key areas. The first, is regarding the clarity of the contractual terms on
the consumer’s behalf, which encompasses factors such as their understanding of
them, whether any expert advice or explanation was sought, and also the
consumer’s soundness of mind. The second, involves the nature of the parties’
contractual relationship. Here the bargaining strength of the parties, the consumer’s
reliance on the supplier’s skill, the seller’s conduct during similar contracts, fair
dealing standards, and the negotiation of the terms, comes in to play.’]
Substantive unfairness is governed under Section 24D, which provides that a
contractual term is substantively unfair if it is either harsh, oppressive,
unconscionable, or if it excludes or restricts liability for negligence or breach of
express or implied terms. As with the procedural unfairness provision, a list of
circumstances that the court may consider in assessing substantive unfairness is
provided under subsection (2). As for exclusion clauses specifically, the relevant
considerations include, amongst others, which may lead to disadvantage on the
buyer’s side (including unilateral termination & modification, and unequal exchanges
of monies).
One case which illustrates the application of Section 24D towards exclusion clauses
is Fairview International School Subang Sdn Bhd v Tribunal Tuntutan
Pengguna Malaysia [2015] 1 CLJ 224, a judicial review of the Consumer Claims
Tribunal’s award regarding a student enrolment contract which contained a clause
specifying that a notice of withdrawal must be given from a full academic term prior
to the withdrawal date. It also contained an exclusion clause, reserving the right of
the school to unilaterally amend the terms and conditions of enrolment.
The dispute concerned the respondent who withdrew her child, without complying
with the notice requirement. She claimed that since the school had amended its
academic schedule to consist of four-month terms, it constituted a unfair unilateral
modification of the contract, which was avoid according to Section 24. The High
Court held that
Analysis
What may be drawn from the provisions is that although a list of considerations is
provided for both procedural and substantive unfairness, these factors do not
constitute a binding guidance, and are only persuasive considerations that courts
may or may not consider relevant. As such, consumers and suppliers alike would
find difficulty in not having a clear set of rules to comply to.
The division between procedural and substantive unfairness attempts to provide
clarity