By Irene Kim and Gavin Parsons
Business compliance is set to become stricter with higher penalties. On 10 November 2023, new laws will commence allowing the Federal Court to impose maximum penalties relating to unfair contract terms (UCTs). This new amendment, which expands the existing UCTs regime, aims to protect small businesses by widening the regime’s reach and increasing the penalties so that business do not exploit imbalanced bargaining power.
What are the new changes?
Currently the UCTs regime is contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth). However, it is expanding and the following are the key amendments:
What makes a contract term ‘unfair’?
In general, UCTs cause significant imbalances in the rights and obligations of parties, are not reasonably necessary to protect the interests of the party who would be advantaged by such a term, and would cause detriment to the other party if the term were applied or relied on.
Key examples of UCTs are:
What are the Consequences?
As our previous article explained, the court has the power to declare UCTs void and unenforceable. The new regime further empowers this authority, also allowing the courts to issue injunctions.
Additionally, the new regime will allow for significant financial penalties to be ordered against businesses that seek to impose UCTs on customers. These include:
The greater of:
Our Recommendations for Businesses
The new amendments will be applied to contracts made on or after 9 November 2023, and to any existing contracts that have been reviewed on or after 9 November 2023. Given the serious consequences, businesses should minimise the risk of incorporating UCTs into contracts. The team at Gavin Parsons and Associates highly advise our clients to proactively review relevant contracts and make changes if necessary. Additionally, businesses can do the following to refrain from and/or minimise the incorporating of UCTs:
As always, please feel free to share this article with your colleagues, friends and clients as we know everyone will appreciate this useful resource. If you require further information and assistance in understanding the UCTs, please contact Gavin Parsons or the team at Gavin Parsons and Associates on (02) 9262 4471 or at email@example.com.
The content of this paper is a general guide only, and should not be relied on as legal advice. Precautions have been taken to ensure that the information is accurate as at the time of publication, however, Gavin Parsons and Associates does not guarantee, and accepts no legal liability whatsoever arising from or in connection with, the accuracy, reliability, currency or completeness of any material contained in this paper.
This paper is not to be used as a substitute source of legal advice. If you, your colleagues, friends or clients would like to ensure whether your contract has any UCTs, we would strongly recommend obtaining appropriate legal advice relevant to the particular circumstances.
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