Unfair Contract Terms Regime Commencing November 2023

Written by Mathew Zagby

SUMMARY:

In November 2023, a new unfair contract term (UCT) regime will be introduced in Australia. With only several months left prior to the substantial changes of the UCT laws, now is the time businesses should prepare for the changes and review and amend any potentially problematic standard form contracts.

WHAT IS CHANGING?

The UCT reforms introduced by the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 (Cth) makes several key changes to the UCT laws in both Australian Consumer Law and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), including:

• significant and increased financial penalties for each individual UCT contravention;
• significantly expanding the number of business-to-business contracts subject to UCT laws;
• The extension of protections to small businesses with fewer than 100 employees or has a turnover for the last income year of less than AU$10,000,000;
• greater flexibility of remedies for breaches and empowers the courts to impose more extensive remedies and orders as considered appropriate by the courts; and
• clarity on the definition of a “standard form contract” specifying that a contract may still be deemed a standard form contract despite there being an opportunity to negotiate minor or insubstantial changes, the opportunity for negotiation must be substantial and meaningful.

The ACCC’s recent proceedings against Fuji Xerox highlights and provides further guidance relating to the contract terms that the ACCC consider to be unfair, including but not limited to:

• unilateral variation terms,
• automatic renewal terms, and
• unilateral liability limitation terms.          
  

WHAT DO YOU NEED TO DO?

With a broadened scope and significant penalty provisions beginning in November 2023, businesses should take proactive steps prior to November, including but not limited to:

• considering whether standard form contracts that were previously not captured by UCT laws are now captured under the changes;
• mitigate risk and review current standard form contracts to ensure they do not contain unfair contract terms, and amend (or remove) them where required; and
• communicate any UCT amendments across the organisation, including internal training on UCT to ensure your business understands its obligations under the regime.

JHK can assist you with contract preparation and review and can provide you with advice on your rights and obligations under the ACL, particularly in light of recent UCT reforms. Please contact us if you would like more information about the services we provide.