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Membership Contracts: How To Protect Your Club

Keep an eye out over the coming weeks as we provide you with legal guidance, tailored to those in the fitness industry, delivered by Scott McKenzie from Mills Oakley. In the first article of this series we provide you with information about Membership Contracts and how to protect your luxuries (e.g. cancellation fees and termination rights).

As the fitness industry has continued to experience rapid growth, various government bodies (including the ACCC and Consumer Affairs Victoria) have started to turn their attention to business practices adopted within the industry.

Particular focus has been concentrated on the membership agreements offered by gyms and health clubs, particularly given that members often lack commercial leverage to negotiate the terms and conditions offered.

Key contractual terms, which often cause problems can include:

a) Minimum term / automatic renewal: these provisions need to be carefully tailored so that they do not create a significant imbalance between the rights of the parties. Issues often arise where termination rights are not appropriately outlined.

b) Payment default: the rights of the gym and the obligations of the member if they fail to pay on time need to be clearly set out and drafted in a fair and reasonable way.

c) Cancellation fees: any cancellation fees applied under a membership contract will need to be reasonable and appropriate in the circumstances (particularly in light of any administration and other expenses actually incurred by the gym).

d) Changes to services provided: you will need to ensure that members are appropriately informed of their rights where there is a change to the services provided (including allowing them to terminate their membership in some circumstances).

e) Limitations of liability / waivers: limitation and waiver clauses must be carefully drafted to ensure maximum protection for the business without being excessively broad (which can cause them to become unenforceable).

f) Direct debits: this is an often overlooked area, however you must be mindful to not breach consumer laws in relation to ‘third line forcing’ (i.e. requiring your customers to use a third party direct debit provider) when agreeing to a direct debit arrangement.

Membership contracts are much like exercise, whereby correct form is crucial. If your terms and conditions are not appropriately tailored then you are placing your business at serious risk. It is particularly important to get termination clauses, direct debit provisions and limitations of liability carefully drafted so that you avoid any compliance or regulatory headaches.

For a complimentary discussion about any issues that this may cause for you contact Scott McKenzie from Mills Oakley on 03 9605 0077 or via email.

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