Urgent Reminder: Changes to the Unfair Contract Terms (UCTs) Regime – 10 November 2023

As outlined in our article explaining the new Unfair Contract Terms (“UCTs”) regime, effective from 10 November, higher maximum penalties will applicable to contracts containing UCTs.

Key takeaways:

• What are UCTs? These are clauses that create a significant imbalance in bargaining power. They do not reasonably protect the interests of the party who would be advantaged by the term and would cause detriment to the party that relied on the term.
• What are some examples of UCTs? Notable examples of UCT are
  • Automatic renewal (terms allowing business to automatically renew contracts).
  • Disproportionate termination (terms enabling termination in a much wider range of circumstances without notice).
  • Limitation of liability and indemnity terms (terms that either limit the business’ liability or requires the customer to indemnify).
  • Termination fees (terms requiring consumer to pay exit fees).
  • Payment before delivery (terms requiring customers to pay the price for the good or service before delivery).
• What is the new UCT regime trying to achieve? The new regime aims to protect small businesses (of less than 100 employees OR with a turnover for less than $10 million) and extends its scope to capture various types of contracts (such as contracts with sub-contractors, retail leases and terms of trade).
• What are the consequences of the new UCT Regime? The new regime introduces significant financial penalties. An individual may face fines up to 2.5 million and companies could be subject to penalties greater of: $50 million OR 3 times value of the benefit obtained by breach OR 30% of the company’s adjusted turnover during the breach period.

What you should do before 10 November 2023

At Gavin Parsons and Associates, we advise our clients to carefully review relevant contracts. It is crucial to ensure that contract terms are transparent and clear, that all rights of parties’ are balanced, that contractual terms aligns with industry standards and codes and that contractual arrangements and risks are thoroughly explained to customers during the sale process.

As always, please feel free to share this reminder with your colleagues, friends and clients as we know everyone will appreciate this useful reminder. 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 gavin@gpalaw.com.au