What is the purpose of the Bill?
The Bill strengthens existing protections against unfair contract terms in the ACL and the ASIC Act. The intention is to better protect consumers and small businesses by reducing the prevalence of unfair contract terms in standard form contracts. The aim is to improve consumer and small business confidence when entering standard form contracts.
The proposed amendments introduce civil penalty provisions prohibiting the use of, and reliance on, unfair standard form contracts. This proposal will allow a regulator to seek a civil penalty from a court.
How could the proposed changes affect you:
Current and proposed changes to unfair contract term penalties are showcased in the below table:
|Unfair contract terms are void
- A person is prohibited from including an unfair contract term in a contract (if that person proposed the unfair contract term) as well as applying or relying on the unfair contract term (or claiming to apply or rely on it)
- For each unfair contract term in a contract, it is a separate contravention
|No current equivalent law
A pecuniary penalty may be imposed if a person makes a contract with an unfair contract term they proposed, or if they apply, rely or purport to apply or rely on an unfair contract term amounting to:
- For a body corporate, the greater of:
- $50 million;
- 3x the value of the benefit of the unfair contract term, if that can be determined; or
- 30% of the adjusted turnover during the breach turnover period (with a minimum of 12 months)
- For an individual:
The court may make orders:
- where a person has suffered, or is likely to suffer, loss or damage because of an unfair contract term; and/or
- to void (including ab initio or from a specific point in time onwards), vary or refuse to enforce part or all of the relevant contract (or collateral arrangement)
Additional to the current law:
the court may make orders it considers appropriate to redress (in whole or in part) loss or damage that has been caused; or to prevent or reduce loss or damage that is likely be caused, by the unfair contract term (including to existing contracts that contain the same or similar terms)
|The court may injunct a party from applying or relying on (or claiming to apply or rely on) a term of a contract that has been declared unfair
Additional to the current law, the court may injunct a person from:
- making future contracts that contain the same or a substantially similar term; and/or
- applying or relying on the same or a substantially similar term in any existing contract, whether or not that contract is before the court
‘Small business’ threshold is fewer than 20 employees and either:
- upfront price payable under the contract is less than $300,000; or
- $1 million if the contract is longer than 12 months
|‘Small business’ threshold is fewer than 100 employees; or annual turnover of less than $10 million
In determining whether a contract is a ‘standard form contract’, the court must consider a number of matters including:
- whether one party was required to reject or accept the terms of the contract in the form it was presented; or
- was given an effective opportunity to negotiate the terms of the contract
Additional to the current law, the court must consider whether a person or company has used the same or a similar contract before, and the number of times this has been done.
A contract may be determined to be a standard form contract despite whether a party had an opportunity:
- to negotiate changes that are minor or insubstantial in effect;
- to select a term from a range of options; or
- for a party to another contract or proposed contract to negotiate terms of the other contract or proposed contract
|Only refers to non-party consumers
Refers to both non-party consumers and non-party small businesses
 a non-party or a non – party small business is a person or small business who has not been involved in proceedings relating to the contravening conduct.
When will the proposed changes apply?
If the Bill is passed into Parliament, it will come into force the day it receives Royal Assent. However, the amendments to unfair contract terms will take legal effect the first day after 12 months beginning on the day the Bill receives Royal Assent.
Please get in contact with us if you believe that the unfair contract term regime applies to you, or if you would like to be vigilant and have your contracts reviewed, otherwise please check in for further updates!
If you have any questions about this article, please get in touch with an author or any member of our Corporate & Commercial team.
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.