WNiF Magazine - Winter 2016 Edition | Page 18

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 WHAT’S NEW IN FITNESS - WINTER 2016