ARE YOUR
MEMBERSHIP
CONTRACTS
PLACING YOU
AT RISK?
By Scott McKenzie
Australia’s leading lawyer to the fitness industry
M
embership
contracts are
perhaps the
most important legal tool
that a fitness centre owner
has at their disposal. They
have the power to set
the boundaries of their
relationship with their
members and to ensure
that risks are minimised to
the greatest extent possible.
However, a troubling trend is emerging
in the industry… business owners are
increasingly adopting a ‘set and forget’
mentality and shooting themselves in the
foot by using undesirable contracts.
Given that a failure to pay membership
fees is perhaps the strongest blow that a
18
member can inflict upon a gym owner,
here are some of the legal parameters
around dealing with payment default.
QUICK LEGAL OVERVIEW
By way of brief legal background:
•
•
•
a term of a contract will be ‘unfair’
if it causes a significant imbalance
in the parties’ rights, it is not
reasonably necessary to protect a
legitimate interest of the business,
it would cause detriment to the
consumer and it is contained in a
standard-form contract;
if a term of a contract is ‘unfair’,
it will not be binding (i.e. it will be
‘void’); and
the contract will continue to
operate without the unfair term,
unless it is incapable of operating
without it.
Given all of the above, it is vital that
any important clauses in membership
contracts are ‘fair’ so that they can be
appropriately enforced.
COMMON MISTAKES
It is common for membership
agreements to specifically set out the
rights of the health club in the event that
a member fails to make a payment on
time. For example, some membership
contracts state that upon a failure to
make prompt payment, the health club
may:
1.
terminate the membership and
deny access to the gym, effective
immediately;
2.
immediately seek payment of the
entire balance owing under the
membership contract;
3.
immediately refer the matter to a
debt collector; or
4.
charge a variety of fees (e.g. ‘late
fees’).
Although the four consequences set out
above may seem to be reasonable, and
certainly not unheard of in the context of
membership contracts, Consumer Affairs
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