The major changes to the unfair contract term regime in the Competition and Consumer Act 2010 (Cth) (Act) (made under the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth)) come into effect from 9 November 2023. These amendments broaden the scope of the unfair contract term protections, and the maximum penalties for contraventions, applying to standard form contracts made with consumers and small businesses.
Key changes under the amendments include:
- The definition of a ‘small business’ being updated to include businesses with either fewer than 100 employees or an annual turnover of less than $10 million, meaning more contracts will be subject to the changes once effective.
- The Court being required to consider whether one of the parties used a same or similar contract previously. A contract may be considered to be standard form despite a party being able to negotiate minor or insubstantial changes, a party selecting terms from a range of options pre-determined by the other party, and a party to another contract on similar terms having an opportunity to negotiate the terms.
- That each individual unfair term in a contract will be considered a separate contravention of the Act, meaning a penalty may be imposed for each unfair term. It will also be possible for the same unfair term to contravene the Act multiple times where it is relied on or applied on more than one occasion by a party.
- The Australian Competition and Consumer Commission can apply to the Court to make an order to prevent an unfair term from being used in future contracts. The Court may also grant injunctions to restrain persons from entering into future contracts containing an unfair term or a term similar in effect, or from relying on a term that is in an existing contract (whether or not that contract is before the Court).
The maximum penalty for a body corporate in breach of the Act is the greater of $50 million, three times the value of the benefit obtained from the breach (if it can be determined), or 30% of the adjusted turnover during the period of the breach or the previous 12 months (whichever period is longer). The maximum penalty for an individual in breach under the Act is now $2.5 million.
What you need to do
To ensure your business is not in beach of the amended unfair contract term provisions, now is the time to have your standard form contracts reviewed to ensure they comply with the Act.
Please contact us should you have any questions:
M: 0408 446 013
T: (03) 6235 5147
Published: 2 November 2023