As of 10 November 2023, the unfair contract terms regime will expand to capture a much broader range of standard form contracts. Significant penalties will also apply to relevant businesses that include unfair contract terms within their standard contracts. Applicable businesses will need to ensure that they review their standard terms and conditions and template agreements to ensure that they are not at risk of significant penalties.
Businesses in all industries need to be aware of the incoming changes to the unfair contract terms laws under the Competition and Consumer Act 2010 (Cth) and the Australian Securities and Investment Commission Act 2001 (Cth).
Once the changes come into effect, it will be illegal to include an unfair contract term in a standard form consumer or small business contract.
Is my business captured under the new laws?
As of 10 November 2023, with limited exceptions, the following standard form contracts will be subject to the new unfair contract terms regime.
Contracts for the supply of goods or services or the sale or grant of interest in land where either party has less than 100 employees or a turnover of less than $10 million.
Contracts for the supply of a financial product or financial services where either party has less than 100 employees or either party has a turnover of less than $10 million and the contract price is under $5 million.
What is a standard form contract?
Generally, a standard form contract is a contract prepared by one party and offered on a “take it or leave it” basis, or where the other party has little unput into the terms of the contract. Standard terms and conditions and template agreements will be captured. There is a presumption that a contract will be a standard form contract unless demonstrated otherwise.
What is an unfair contract term?
An unfair contract term is a term that:
gives one party a significant advantage other the other;
is not necessary to protect the legitimate interests of the party with the advantage; and
would cause detriment to the other party if enforced.
What are the penalties for unfair contract terms?
For contracts for the supply of goods or services or the sale or grant of interest in land, the maximum penalty for companies will be the greater amount of:
$50 million;
three times the value of the benefit derived from the unfair term (if able to be determined); or
30% of the adjusted turnover during the period of the breach.
For contracts for the supply of a financial product or financial services, the maximum penalty for companies is the greater of:
50,000 penalty units (currently equal to over $15m)
three times the value of the benefit derived from the unfair term (if able to be determined); or
the lesser of 10% of annual turnover for the preceding 12-months or 2.5 million penalty units (current equal to over $700m)
What do I need to do?
Businesses should review their standard terms and conditions and template agreements to ensure that the terms included are not unfair. For assistance reviewing contracts and for more information about the types of contracts that could be captured by the new requirements, please contact Katie Pote.
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.