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Abstract

In Malaysia, the regulation of unfair contract terms within business-to-consumer contracts falls under the jurisdiction of Part IIIA of the Consumer Protection Act 1999. This regulatory framework is overseen by the Ministry of Domestic Trade and Living Cost. However, the effectiveness of Part IIIA is hindered by certain gaps, resulting in its infrequent utilization for determining unfair terms in consumer contracts. One of the primary challenges lies in interpreting key terms such as “harsh,” “oppressive,” “unconscionable,” and “adequate justification.” These ambiguities often remain unresolved until legal proceedings take place. Complicating matters, doubts persist regarding the applicability of the Consumer Protection Act, 1999 to financial contracts, which predominantly consist of standard-form contracts. This ambiguity can partly be attributed to the divergence in the definitions of “consumer” as outlined in the Consumer Protection Act, 1999 and the Financial Services Act 2013, as well as the Islamic Financial Services Act 2013 and the Development Financial Institutions Act 2002 which includes small businesses as well. While these laws empower the Central Bank of Malaysia to establish standards related to consumer protection, including unfair contract terms, such regulatory guidelines have yet to be introduced. Thus, inconsistency prevails, leading to divergent judicial interpretations and verdicts concerning cases involving unfair contract terms. Employing doctrinal and comparative legal research methodology, this study examines the position of unfair term laws in Malaysia and Australia for benchmarking purposes. Based on the comparative analysis, some recommendations are proposed to enhance Malaysia’s current legal position governing unfair terms in consumer contracts. The significance of this study lies in its aim to improve the legal regime concerning unfair terms, thereby fostering greater predictability. The suggested reform is poised to bolster safeguards for consumers who find themselves at a disadvantage in contractual negotiations with corporate entities.

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