With changes to the unfair contract terms (UCT) regime coming into effect as of 9 November 2023, all businesses should have reviewed their standard form agreements and terms and conditions to ensure they are compliant with the new legislation. As outlined in our earlier article here, these changes under the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) will:
Whilst the test for whether a contract term is unfair remains unchanged, businesses are now exposed to significant penalties if they rely on UCT. A business that fails to comply with the changes to the UCT regime will face penalties calculated based on the greater of:
For an individual who has breached the UCT Regime, the maximum penalty is $2,500,000. These new penalties stress the importance of ensuring that your documents are compliant under the regime.
How do I know if the changes apply to me?
The changes apply to small business contracts or consumer contracts that are in a standard form. Under the changes, a “small business” is defined as a business who employs up to 100 people (increased from 20 people) or any business with an annual turnover of less than $10 million.
Unfortunately, the question of whether a contract is in a standard form can be a complicated one and there is no blanket rule in this respect. Generally, standard form contracts are issued on a ‘take it or leave it’ basis and are prone to cause disadvantage to the other party. Commonly this may take the form of terms and conditions which all customers of a business are expected to agree to, however there may be different forms of standard form contracts. When determining whether a contract is in a standard form, the following factors need to be considered:
If a party alleges that a contract is in a standard form, it is presumed to be so, unless proved otherwise. If you are unsure as to whether the changes apply to you, you should err on the side of caution, noting the substantial penalties stemming from a failure to comply with the regime. It is not a defence to mistakenly characterise a document as falling outside the operation of the regime.
What do I need to look at in my contracts?
The Australian Consumer Law provides examples of terms that may be unfair, including a term that permits one party (but not another party) to:
When reviewing your contracts, particularly in relation to the above rights and obligations, you should ensure that:
What else should I know?
Previously, the Australian Competition and Consumer Commission (ACCC) indicated in its 2023-24 Compliance and Enforcement Priorities that it will be prioritising enforcement of the UCT laws. More recently, the ACCC has encouraged businesses to review their standard form contracts and make the necessary amendments before the new penalties take effect.
Businesses have had a 12-month transition period to make the necessary adjustments in light of the reforms and it appears that the ACCC will not act with further delay, ramping up its enforcement of the changes to the UCT regime from 9 November 2023.
Coulter Legal can assist in reviewing your existing terms and conditions and contracts to ensure compliance with the UCT regime, or draft new terms and conditions tailored to your business needs.
For further assistance, contact the Corporate and Commercial team today.
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