CHANGES TO THE UNFAIR CONTRACT TERMS LAWS TO IMPACT BUSINESSES
New laws seeking to provide further protection for consumers and small businesses from unfair contract terms in standard form contracts received Royal Assent in November 2022 with changes to come into effect 12 months after it received Royal Assent.
A standard form contract is usually offered to consumers or businesses for similar goods or services, where it is prepared by one party to the contract, and the other party has little or no opportunity to negotiate the terms. Some examples of standard form contracts include mobile phone plan contracts and gym membership contracts. Seek legal advice if you are unsure whether your contract is considered a standard form contract.
What is an ‘unfair contract term’?
For a term to be considered unfair, a term must:
- cause a significant imbalance in the parties’ rights and obligations;
- not be reasonably necessary to protect the legitimate interests of the party advantaged by the term, and
- cause financial or other detriment (such as delay) to a small business if it were relied on.
Some examples of unfair contract terms are the right to unilaterally vary the contract, right to terminate with no cause and wide indemnity clauses. Read more here ACCC Unfair Contract Terms.
The changes introduce penalties for businesses that include unfair contract terms in their standard contracts with consumers and small businesses.
The law seeks to provide further protection by introducing increased penalties for breaches of certain provisions of the Competition and Consumer Act 2010 (Cth), including the Australian Consumer Law.
The law also expands the ‘small business’ threshold to capture those that employ fewer than 100 people (previously 20) or has a turnover for the last income year of less than $10 million.
For businesses that use standard form contracts, it is time to review and assess whether your contract is captured under the unfair contract terms law, and if there are any terms that may be considered unfair before penalties apply.
For those entering standard form contracts, if you are unsure if the contract is captured under the unfair contract terms law, and if any of the terms are unfair, you can seek legal advice to determine if you can ask the other party to amend or remove those terms.
How West Perth Legal Can Help
West Perth Legal’s Contract and Commercial Lawyers regularly work with a range of commercial contracts, our Lawyers are experienced in drafting, reviewing, and negotiating contracts. Contact Us for a complimentary 15-minute initial telephone consultation.