Do you need to review your standard form contracts?

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In our previous legal update, we noted that recent changes to the Australian Consumer Law (ACL) have expanded the scope of the country’s Unfair Contract regime.

As a result, businesses that use standard form contracts containing unfair terms when dealing with consumers or small businesses may be liable to onerous financial penalties.

There are several key questions businesses need to ask themselves, including:

  1. Are we using ‘standard form contracts?
  2. If yes, do our contracts include unfair terms?

In this article, we will consider the first question.

What is a Standard Form Contract?

Although the ACL does not give a definition, standard form contracts are commonly understood to be agreements where the terms and provisions are in a form that the business reuses repeatedly. Examples include your credit card or telephone contracts. These agreements are typically presented on a ‘take it or leave it’ basis.

The ACL sets out several criteria that guide the inquiry into whether a contract is a standard form contract, such as whether:

  • One party in the transaction had all the bargaining power;
  • One party has entered into multiple contracts that it has prepared on substantially similar terms; and
  • The terms of the contract were negotiated.

Importantly, you should note that negotiating a few incidental terms ‘here and there’ will not stop an agreement being a standard form contract.

Why should I care?

This isn’t an issue that just affects major companies like utilities and telcos – it can apply to a wide range of contracts.

Businesses that use standard terms and conditions should be alert. This will have wider applications than you might think on first glance. For example, professional services such as financial advisors, engineers and architects that provide template engagements for their clients.

Lease agreements, gym memberships, parking tickets and software licences are all standard form contracts. In fact, unless the parties consciously negotiated terms, most agreements are likely to be standard form contracts.

What should I do?

If your business uses standard form contracts, you should review them immediately for unfair terms.

Aintree Group Legal will be happy to discuss this with you, so don’t hesitate to contact us today if you believe this will impact you!