On 9 November 2023, the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) (the Act) came into effect.
As a result of the Act, there are now significant changes to the unfair contract terms (UCT) regime, which grants the Australian Competition and Consumer Commission (ACCC) new powers to enforce the UCT laws (UCT Regime).
The extended powers of the ACCC enables them to issue fines up to:
- $50,000,000 for corporate businesses; or
- $2,500,000 for individuals; or
- If quantifiable, three times the value of the benefit obtained; or
- 30% of a businesses turnover during the offence period if the value of the benefit cannot be determined.
What does this mean?
The UCT Regime and laws will apply to standard form small business contracts and consumer contracts entered into or varied on and after 9 November 2023.
The purpose of the UCT Regime is to protect consumers and small businesses to ensure that business contracts are fair and equitable. In turn, this means that businesses (and their contracts) are exposed to the risk of increased contractual disputes and penalties.
Pursuant to the UCT Regime, an UCT (as defined at section 24 of the Australian Consumer Law (ACL)) will no longer be deemed just unenforceable, but rather it will be illegal for businesses to rely upon the UCT.
In simple terms, that is:
- each UCT in a standard form small business contract or consumer contract can constitute a separate contravention of the new UCT laws;
- a party providing or proposing to enter into an unfair contract, or relying on an UCT within a contract, will be found to have contravened the new UCT laws; and
- now, as opposed to prior to when the UCT Regime came into effect, a contract can still be considered a standard form contract even if the parties have negotiated minor changes prior to the execution of the contract.
What is a Standard Form Small Business Contract and Consumer Contract?
In order to determine whether the UCT Regime affects you and your business, the first step is establishing whether your contract is a standard form small business contract or consumer contract.
Pursuant to the ACL, a standard form contract is a contract which has a standard set of terms that leave little to no room for negotiation or changes. Some examples include, but are not limited to, standard terms and conditions, online terms, hire contracts and service agreements.
A business contract is any contract where one of the parties has less than 100 employees or less than $10 million in turnover in their last financial year.
The ACL defines a consumer contract as one that is for the supply of goods or services of a kind ordinarily acquired for personal, domestic, or household use or consumption and the amount paid is less than $100,000.
Understanding the fundamentals of an UCT is critical in ensuring that a standard form small business contract or consumer contract is well balanced and does not cause detriment to the other party.
In accordance with the ACL, a term is unfair if:
- it would cause a significant imbalance of rights;
- it is not reasonably necessary to protect the legitimate interest of a party; and
- it would cause detriment to a party.
What to do if your Standard Form Small Business Contract or Consumer Contract contains UCT’s?
If your contract contains terms that potentially evade or limit the other party’s obligations or responsibilities, vary the price or renewal period without sufficient notice, or penalise the other party in any way, then we recommend that you obtain legal advice in order to ensure that you are not in contravention of the UCT Regime.
Please contact BBW Lawyers to discuss your contracts and/or how the UCT Regime may affect you on (02) 9210 9100 or by emailing John Fairgray (email@example.com) or Balveen Saini (firstname.lastname@example.org).