Phone contracts and buying a mobile phone

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The mobile phone contract is the official record of your agreement with the phone company that says what you and the phone company agree to do and not to do. Phone contracts are ‘standard-form contracts’ This means that the contract has been prepared by the phone company, and you can’t negotiate or change any part of it. Therefore, it is important that you shop around and find the right contract that suits your personal needs. If you’re thinking about signing up to a post paid mobile phone plan, you will need to agree to and sign a mobile phone contract. This comes with many responsibilities. These include:

• Paying your monthly bill
• Paying any insurance
• Paying for the handset
• Dealing with things if they go wrong!

Mobile phone contracts

It is important to know that in order to “sign a contract” you don’t actually have to sign a piece of paper. You can sign a contract with the phone company by:

• Clicking on something that says you agree to the terms and conditions on the internet, or
• Saying that you agree to the terms and conditions over the phone.

If you’re thinking about going onto a mobile phone plan don’t feel pressured to sign it on the spot. It’s OK to shop around, ask lots of questions and talk to your parents or another adult before signing up.

A contract is a legal document so you should only sign it once you completely understand all of the responsibilities, including everything in fine print (it’s usually in very small letters). If you are not sure about any part of the contract, then don’t sign it. The law says that phone companies must explain their mobile phone plans in a way that is appropriate to your communication needs (for example if you have a disability or are young). If you find it difficult to understand that phone plan or need more information, you can ask the phone company to explain the contract to you.

The salesperson might tell you things about the plan, but what you will actually get and what you will have to do is what is written in the contract. It’ important to rely on what is in writing, rather than what the salesperson says. Remember that their job is to try to sell you a phone!

Exiting a contract

If you cancel your post-paid mobile phone contract before the term of the contract has finished, the phone company may ask you to pay a fee for “early termination” as set out in your contract. This is sometimes called an “early termination fee”.   In certain circumstances you may not have to pay this fee, so it is important to know your rights.

Cancelling a contract

If you are cancelling because you are unhappy with the network…

When you sign up for a mobile phone contract, the phone company promises that the network will be fit for obvious purposes (like making and receiving calls and text messages) and for any other purposes that you tell them that you want (like if you say you want to access the 4G network from your home).

If the network isn’t fit for these purposes, the law gives you certain rights.  But, exactly what your rights are will depend on how serious the problem is and whether it can be fixed easily.

If the problem CANNOT easily be fixed, it is a major problem and you CAN cancel your contract without paying an early termination fee. For example, if you told the phone company that you wanted to access the 4G network from your home, but after you sign up you find out the phone company does not have 4G coverage where you live, this would be a major problem and you can cancel your contract without paying an early termination fee.

If the problem CAN easily be fixed, then you generally DO NOT have the right to cancel your contract without paying the early termination fee. But, you DO have the right to ask the phone company to fix the problem and if they do not fix it in a reasonable time, THEN you DO have a right to cancel the contract without paying the early termination fee.

If your contract includes a mobile phone and you have the right to cancel your contract without paying an early termination fee, you must return the phone and the phone company must refund you any money you have already paid for the phone.

If you are cancelling because you are unhappy with your phone

If your contract includes a mobile phone, the phone company promises that the phone will be of acceptable quality.  A mobile phone will be of acceptable quality if it:

• is fit for all the purposes that mobile phones are usually used for (eg calling, texting); and
• looks acceptable; and
• is free from problems; and
• is safe; and
• durable.

If the mobile phone isn’t of acceptable quality or isn’t fit for the purposes that you said you wanted it for, the law gives you certain rights.  But, exactly what your rights are will depend on how serious the problem is and whether it can be fixed easily.

If you are cancelling for another reason

If you are cancelling because you have found a better deal, or you are moving overseas, or some other reason, it is less clear what your rights are.  

The law says that unfair terms in standard form contracts (like most mobile phone contracts) have no effect.  A term that penalises you (but not the phone company) for terminating the contract would be unfair. So, you MAY be able to terminate a contract without paying the early termination fee by arguing that the term in the contract that says you have to pay an early termination fee is unfair.

Examples of unfair contract terms in mobile phone contracts would include:

• a term that lets the phone company (but not you) terminate the contract;
• a term that lets the phone company (but not you) change the terms of the contract.

What information should I be given before signing up?

Phone companies must give you a Critical Information Summary (CIS) in store, by phone or online for every phone plan that they advertise. A CIS is a summary of the most important information about the mobile phone plan. It will help you understand the terms of the offer and make it easier to pick out the differences between other offers.

The CIS must include:

• A description of the service or product, such as information about pricing, and other information like links to customer service, warnings, and how to contact the Telecommunications Ombudsman  if you can’t solve a problem with your phone company.Warnings about international roaming costs.
• Pricing information, such as the cost of making a 2-minute national mobile call, sending a national SMS and uploading or downloading one megabyte of data within Australia.
• The maximum charge payable if you want to get out of the contract early.
• If you have ‘included value’ in your plan, the CIS must tell you the number of calls you can make each month if you only use your phone to make national mobile calls each of 2 minutes or less.
• Customer service contact details (like a phone number that you can call to seek further assistance).
• whether the offer depends on a bundling arrangement with other telecommunications services like broadband, cable TV or landlines, and, if so, a description of those other services;

The CIS may not have all the information you need. For example, there is no requirement for your phone company to include information about coverage guarantees or warranties.

Advertising and mobile phones

Advertisements (or ads), in any form (like posters, TV ads, Magazine ads or even Facebook ads) have to be accurate and not misleading.

• Phone companies can’t use the words ‘unlimited’, ‘no exceptions’ or ‘free’ to advertise a mobile phone or network service, unless it’s true. Here are some examples:
• If your phone company says that your internet service is ‘unlimited’ ,, they can’t say in the fine print that after you use a certain amount of data, your internet speed will become slower.
• Advertisements can’t say the phone is ‘free’ when you buy a phone and contract package if you are actually paying the phone off over the term of your contract or by paying extra charges (e.g. higher call costs).
• Phone companies are not allowed to use the word ‘cap’ to advertise a new offer unless they are talking about a service with a hard cap (a maximum limit that you will not be charged over).

Phone companies can’t advertise or promote network coverage unless it’s usually available to customers in the advertised coverage area.

What you can do

If you think the law gives you the right to get out of your contract without paying an early termination fee, when you contact the phone company to cancel your contract, explain:

• the reason why you are cancelling your contract;  and
• that you think you should not have to pay the termination fees or charges because of your rights under the Australian Consumer Law.

If this doesn’t work, you could make a formal complaint   and if that doesn’t resolve things, you could contact the Telecommunications Industry Ombudsman.

You should know, if the phone company makes you another offer (like giving you a discount on your monthly repayment, or offering you a different phone) and you accept that offer, you may lose your right to cancel your contract without paying an early termination fee.

Also, even if you do not have to pay an early termination fee, you may have to pay a lot of money when you cancel your contract if:

• you owe money for past usage; or
• if you are keeping the phone and you have not finished paying for the phone.