Changes to Australian Consumer Law "Unfair Contract Terms" – What do they mean for you?

The Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 has recently made waves in the legal realm, bringing about significant modifications to the 'unfair contract terms' (UCT) provisions within the Australian Consumer Law.  As of 10 November 2023, these changes are in full effect, meaning the UCT Provisions apply to contracts entered into or renewed or varied from that date onward. 

Businesses must carefully consider these amendments, prompting a thorough review and adjustment of their contracts and operational practices. In this article, we explain the amendments, their legal implications and why they matter to your business.

Key Changes to UCT Provisions 

The amendments significantly modify unfair contract term provisions in the ACL and the ASIC Act. 

Expanded meaning of standard form contracts

The ACL unfair contract provisions previously only applied to consumer or small business contracts that were "standard form contracts" – generally being a ready-made agreement where one party (usually the business) sets all the rules. The changes expand the application of these provisions because now a contract can be found to be a "standard form contract" even where a party has had an opportunity to:

• to negotiate changes that are minor or insubstantial in effect;
• to select a term from a range of options determined by another party and;
• to another contract or proposed contract to negotiate the other contract's or proposed contract's terms.

The practical effect of this change is that it reduces the ability of businesses to enforce their Terms and Conditions if they are unfair, even if the customer has 'agreed' to them. 

The UCT provision

Rather than looking at the value of the contract in question as was previously the case, the UCT provisions now apply to businesses that:

• employ less than 100 persons (up from 20 previously); or 
• had a turnover of less than $10 million in the last income year.

This means the UCT provisions apply to more (particularly larger) businesses than was the case previously. Consumers, therefore, have recourse to these provisions in a greater range of circumstances.

In addition, the Bill prevents businesses from avoiding the UCT provisions by clarifying how employees are to be counted to ensure a more accurate reflection of a business's scale. For example, casual employees are counted if they are employed regularly and systematically. Part-time employees are now considered a fraction of a full-time equivalent.

Introduction of penalties

Under the Bill, both UCT regimes will be amended to prohibit expressly:

• the inclusion or reliance on a UCT in a standard form contract;
• applying or relying on (or purporting to apply or rely on) a UCT in a standard form contract; and
• proposing a UCT in a standard form contract, which they have entered into.

This means that your business may incur substantial liability if its contracts are not reviewed for compliance with the UCT provisions.

Penalties for breaching the ACL UCT prohibitions range from $2.5 million for an individual, to greater than $50 million for companies. 

If the court can determine the value of the benefit obtained—the penalty could be three times that amount. And if the court cannot determine the value of the benefit obtained—the penalty could be 30% of the company's turnover during the turnover period for the offence.

Expanded Remedies

The Bill will expand the above by ensuring that an unfair contract term in a standard form contract remains automatically void and will allow a Court to make orders to void, vary or refuse to enforce the contract if it is appropriate to:

• prevent loss or damage that is likely to be caused; or
• remedy loss or damage that has occurred.

How Enterprise Legal Can Assist

These changes necessitate a proactive approach from businesses, prompting a thorough review and adjustment of contracts to align with the new requirements. 

Enterprise Legal's dedicated Business Team can assist in reviewing the contracts for your business. Businesses often issue numerous standard form contracts daily, so they are exposed to significant liability if all of their contracts are subsequently found to contravene the UCT provisions. 

Our Disputes Team is well-equipped to act on behalf of your business in defending complaints by consumers. Whether representing consumers or businesses, we strive for positive outcomes using the UCT Provisions. In a recent case, we successfully utilised the UCT provisions to vary a contract and achieve a favourable outcome for our client.

For specialist guidance in navigating these changes and ensuring your business is on the right side of the law, do not hesitate to contact Enterprise Legals's business team today. 

Let us provide the legal expertise your business needs to thrive amidst these regulatory shifts!