Long-awaited changes to unfair contracts took effect on 9 November 2023 and by now Members should have reviewed their own existing arrangements. Just in case you’re in the dark, here’s our quick guide.
The new laws attempt to redress the imbalance between big businesses and smaller contractors.
The changes are to the Australian Consumer Law (ACL) and the Australian Securities and Investments Commission Act 2001 (ASIC Act) and mean that Unfair Contract Terms (UCTs) now contravene these laws.
The UCT regimes apply to standard form contracts. These are contracts prepared by one party that contain a standard set of terms that the counterparty has little or no opportunity to negotiate.
They apply to consumer and small business contracts.
Consumer contracts are defined as being for the supply of goods or services (or a sale or grant of an interest in land), to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic, or household use or consumption.
The small business contract definition varies. Under the ACL, they are for the supply of goods or services and at least one party employs fewer than 100 full-time equivalent employees (up from 20) or has an annual turnover of less than $10 million.
Under the ASIC Act, they are contracts where the upfront price payable under the contract is less than $5m (up from $1m for contracts longer than 12 months, and $300,000 for contracts less than a year) and at least one party employs fewer than 100 full-time equivalent employees (up from 20) or has an annual turnover of less than $10m.
A term in any contract to which the UCT regime applies will be deemed unfair if it:
• Causes a significant imbalance in the parties’ rights and obligations;
• Is not reasonably necessary to protect the legitimate interests of the party advantaged by the term; and
• Would cause detriment (financial or otherwise) if relied upon.
Whether a term is in breach will be considered on a case by case basis. If you regularly use Standard Form Contracts, you should review them and possibly involve a lawyer.
If somebody asks you to sign a Standard Form Contract that looks unfair, contact a NatRoad advisor or a lawyer.
