UNFAIR CONTRACT TERMS LEGISLATION

Update 19 February 2021

A few amendments to the Unfair Contract Terms legislation are anticipated this year (2021).  Broadly, the legislation will apply to a wider range of contracts, and penalties will be introduced for the use of unfair contract terms.  If you use standard form contracts, or have entered into one which you believe is unfair, this article may be of interest to you.

Penalties and Expanded Application.  In November last year Federal, State and Territory Consumer Affairs Ministers signified their agreement to the following amendments. Legislation has yet to be passed or tabled but given the widespread agreement, is expected soon.

 

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Penalties.  Currently if an unfair term is used it will be declared void and any action taken pursuant to the unfair term may be unwound, but there are currently no penalties for the use of “unfair contract terms”.  It is proposed that penalties be introduced for the use of “unfair contract terms”.    

 

Small Business Contracts.  The Unfair Contract Terms legislation applies to “small business contracts” (and “consumer contracts”).  Currently “small business contracts” are those where:

 

  • at least one party is a business that employs less than 20 employees at the time the contract is entered into; and

  • the "upfront price payable under the contract" does not exceed $300,000 for a contract with a duration of up to 12 months or $1 million for a contract with a duration of more than 12 months. 

 

Number of employees to change.  It is proposed to extend the application of the legislation to include contracts where a party is business that employs fewer than 100 employees (at the time the contract is entered into) or that has an annual turnover of less than $10 million.

 

Upfront price to be removed.  It is proposed to remove the threshold for the upfront price so that the legislation applies irrespective of the amount of the upfront price payable. 

 

“Standard contract” definition.  The Unfair Contract Terms legislation only applies to “standard contracts” and “consumer contracts”.  It is proposed that there be greater clarity as to the meaning of “standard contracts”. 

Insurance Contracts.  The Unfair Contract Terms legislation applies to standard form business contracts generally.On 5 April 2021 the Unfair Contract Terms legislation will be expanded to apply to insurance contracts. 

 

Please refer to our article here for an outline of the Unfair Contract Terms regime.

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Contact

If you would like to discuss any aspect of this article with us, or share your own experiences, please contact Rod Stumbles at +613 8692 7255 or here.

 

DISCLAIMER

 

This article provides general information only and is not intended to constitute legal advice.  No lawyer-client, solicitor-client or attorney-client relationship has been created between us.  You must not rely on the contents of this article, whether as an alternative to legal advice from a lawyer or other professional legal services provider or otherwise.  You should not take, discontinue or refrain from taking any action because your understanding of the contents of this article, including without limitation delay seeking legal advice or disregard legal advice.  If you have any specific questions about any matter, you should engage us or other lawyers or other professional legal services providers to provide you with the necessary advice.  Keep in mind that you may be facing important deadlines so you should not delay in engaging someone to provide you with the advice.

 
 

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