Need to consult with lawyer regarding unfair terms in contract and consumer protection? Or need to consult with lawyer regarding any agreements?
Covid-19 happened and MCO was announced. You feel that the pandemic is affecting everyone, and the circumstances are uncertain. You decided to freeze your gym membership account but later on, you decided to cancel the membership. However, you are being told that you need to activate your gym membership account again in order to cancel your membership. This is regardless of the fact that you have communicated your intention for such cancellation via email during the MCO which might be more than a month before gyms are allowed to resume operation again. You are in confusion as you are required to pay for a one-month notice membership fee in full in order to activate your gym membership account to then cancel the membership. You found that you have signed on the agreement when you first registered for the gym membership years ago for all the unfair terms which are changed invariably by the gym from time to time without the need to inform you which were all printed at the back of the agreement in Arial font 5.
The above-mentioned scenarios might look absurd but it is quite common in Malaysia as there has been a rapid growth in the health and fitness industry with commercial gyms, as they called it, are now being established rampantly in almost every mall and shop lots in Malaysia and Malaysia is full of malls and shop lots.
The Act
In Malaysia, the main governing statutes that regulate the sales of goods and supplies of services are the Contracts Act 1950 (CA 1950), Sales of Good Act 1979 (SOGA 1979) and Consumer Protection Act 1999 (CPA 1999). The dispute often arises when customers find that they are being socially compelled to agree to unfair contract terms which are contractually legal and binding. They feel that the contract are oppressive and prejudice against them from a consumer’s perspective as they are deprived of basic consumers’ rights and should be illegal in the first place.
CPA 1999 does provide that the application of the Act shall be supplemental in nature and without prejudice to any other law regulating contractual relations1. However, as businesses operate to provide services to the public, we cannot deny the fact that an agreement between a promisee and a promisor can also be an agreement between a consumer and a supplier. When services are provided to the mass public, consumers’ rights are inevitably involved, and there should be a protection to such rights, otherwise, the health and safety of the public will be jeopardised. Section 5(d) of CPA 1999 specifically states that the Act shall not remove or restrict the effect of any contractual terms only if the agreement imposes stricter liability or provides a remedy more advantageous to the consumers than under the Act. Section 6 of CPA further buttresses the protection of consumer’s rights by providing that it is an offence to contract out of the Act and any supplier who purports to do so will commit an offence.
Nonetheless, as cliché as it may sound, a supplier, in this scenario the gym, may insist that you have agreed to all the terms of the agreement of your own volition and too bad for you if it is a bad bargain. No one put you at a gunpoint and force you to sign the contract!
Future Services Contract
An agreement entered between a consumer and a supplier where the supplier agrees to provide services on a continuing basis and the consumers will either pay with a lump sum annually or make a monthly payment for the services they have yet received is known as “future services contract”. Referring to the Consumer Protection (Future Services Contract) (Amendment) Order 2014, amongst others, in this case, gymnasiums fall under the categories of services that provide such future services contract. As such, CPA 1999 does come into play when the future services contract is in dispute.
One of the controversies arises when some suppliers are adamant in insisting on cancellation of future services contract by giving them notice of cancellation personally over the counter as they maintained that this is required under the contractual terms regardless of the fact that businesses are not permitted to operate especially during the first phase of MCO and while they are still able to reply consumers’ enquiries via emails and Whatsapp. This unscrupulous practise is obvious namely when a consumer who already communicated his intention to cancel the gym membership multiple times via emails during the period of MCO has received a negative response from the gym maintaining that no cancellation can be done via email and all his attempts to give notice of cancellation are all in futile. This should not be the case. Section 17(5) CPA 1999 states that a cancellation of a future services contract can either be indicated through words or conduct and Section 17(6) states that only where it is reasonably practicable to communicate with the supplier, the notice of cancellation has to be in writing if required under any express provision in the future services contract.
Additionally, Section 17(4) CPA 1999 has emphasized that in circumstances where it is not reasonably practicable to communicate with the seller, a cancellation of the future services contract shall take effect when the consumer has indicated his intention to cancel such contract to the supplier using the reasonable means under the circumstances. For example, it is absurd for the gym to reject any cancellations or notice of cancellation for gym membership from a consumer via email knowing well that during the pandemic that they are not allowed to open and it is impossible for the consumer to cancel or notify them on the cancellation personally over the counter.
Subsequently, when the consumer waited for the businesses to reopen during the pandemic and finally communicate his intention to cancel his gym membership, he is informed that under the agreement signed, he is required to activate the gym membership account that he has frozen during the pandemic in order to cancel the membership by giving one month notice of cancellation. Simply put, he is required to pay in full for a month for the cancellation of membership and services that he did not ask for. This should not be acceptable. Section 17(2) CPA 1999 provides that a consumer who cancels a future services contract may be charged by the supplier, inter alia, a five per cent (5%) of the full contract price or the portion of the full contract price representing services received by the consumer. Hence, even if he has to activate his account and give one month notice of cancellation to the supplier, the supplier should not charge him a full contract price for the services that he has yet to receive and does not desire.
All the unfair terms are ubiquitous in future services contract and, in this scenario, if you decide not to sign up with a gym due to the unfair terms in contract thinking that you could find another better gym then try your luck as this would not happen. In reality, supplier for services such as gyms are conglomerates that possess lots of resources including a professional legal team to help them to draft a general standard services contract and you are basically left with yourself to do all the legal research, or if you are willing to pay for legal advice just to consider signing a future services contracts with a supplier which is economically impractical.
Additionally, although Malaysian follows English common law most mostly, we do not have statute such as the Unfair Contract Terms Act as practised in the United Kingdom. So what are we left with?
Consumer Tribunal
Luckily, with the government’s intervention by enforcing Consumer Protection Act 1999, we can, for the very least, lodge a claim to the Tribunal for Consumer against the unscrupulous supplier of services2. Section 99 and Section 100 Consumer Protection Act 1999, Consumer Tribunal are conferred with jurisdiction subject to certain limitations under the Act to hear the grievances suffered by the consumers.
Nowadays, with the advancement of technology, the public can also go to the Official Portal of the Ministry of Domestic Trade and Consumer Affairs or Kementerian Perdagangan Dalam Negeri Dan Hal Ehwal Pengguna (KPDNHEP) to lodge a complaint through their E-Aduan platform online. They can either lodge complaints via the hotlines, email, Whatsapp or have a Live Chat with KPDNHEP. By doing so, the government will appoint an officer to look into the complaint and investigate.
Last but not least, in order to prevent any potential litigious issues that might arise, one should always be informed and be aware of the contractual terms that he/she signs with the other party. Consumer Protection Act 1999 might not always be applicable to provide blanket immunity to a consumer who possesses weaker bargaining power against unfair contractual terms. Besides, most of the time, it is not economically pragmatic for a consumer to proceed with legal suits or initiate proceedings against the conglomerate in the Consumer Tribunal when the number of damages suffered is probably a few hundred or a few thousand Ringgits Malaysia.
Prepared by Tan Yee Chen.
Need to consult with lawyer regarding unfair terms in contract and consumer protection? Or need to consult with lawyer regarding any agreements?
1. Section 2(4), Consumer Protection Act 1999 (CPA1999).
2. Section 97, Consumer Protection Act 1999 (CPA1999).