Changes to Australia’s unfair contract regime are coming

You are currently viewing Changes to Australia’s unfair contract regime are coming

Does your business use ‘standard form’ contracts? Or are you routinely asked to sign such contracts?

If so, changes to the Australian Consumer Law that take effect from 9 November 2023 may have serious implications for your business.

The Australian Consumer Law has rules governing unfair contract terms. Currently, provisions in some standard form contracts can be deemed void if they were found to be unfair.

What are the Changes?

Changes that will take effect on 9 November 2023 will greatly expand the scope of this regime. There are two main areas of focus.

Firstly, the legislation applies to consumer and small business contracts.

Previously, a small business contract was one where one of the contracting parties was a business that employed fewer than 20 employees and the value of the contract was less than $300,000.

Now, a contract will be deemed a ‘small business contract’ if a party to the contract employs fewer than 100 employees and/or has turnover of less than $10m. It will also be expanded to include any Business Lending where the Total Contract Amount is less than $5 million. A lower $5m threshold applies for contracts for financial products or services.

Secondly, civil penalty provisions and fines will apply to businesses that issue an unfair contract. Previously, consumers could merely seek to have unfair contract terms declared void.

What is a Standard Form Contract?

A standard form contract is a template agreement that a business uses repeatedly. They are often presented on a “take it or leave it” basis where the customer has little scope to negotiate its terms. Phone or credit card, and loan contracts are obvious examples, but services delivered under standard terms & conditions are likely also caught.

What is Unfair?

A term will be unfair if:

  • It causes significant imbalance in the parties’ rights and obligations;
  • It is not reasonably necessary to protect the legitimate interests of the party advantaged by the term; and
  • It would cause detriment to the other party if it was enforced.

Examples might include unilateral rights to vary or terminate a contract, or terms which impose unfair fees.

What should I do?

Businesses that use standard form contracts should review those documents immediately. If concerned, they should seek advice on how to amend their contracts.

Aintree Group Legal will be happy to assist in revising your standard form contracts. Contact us today.