- The unfair contract terms regime will significantly expand on 9 November 2023.
- Significant penalties of AU$50 million (or more) are a call to action for businesses who contract under standard form contracts with consumers or small to medium businesses. Further, courts will be given broad discretion to address the impact of unfair contract terms.
- These reforms will require businesses to revisit and test the underlying rationale for a range of standard commercial positions in their standard form contracts. Alignment with industry practice will not necessarily be a bar to enforcement action.
The unfair contract terms (‘UCT’) regime will expand on 9 November 2023. While this article focuses on UCT developments under the Australian Consumer Law (‘ACL’), there is a very similar UCT regime under the ASIC Act.
When does the UCT regime apply?
The unfair contract terms regime applies where a ‘standard form’ contract for the supply of goods or services is formed and one party is a consumer or a small business.
From 9 November 2023:
- the definition of a ‘small business’ will expand to cover businesses whose turnover is less than AU$10 million or who have less than 100 employees (at the time they execute the contract). The regime will continue to apply to ‘consumer contracts’, where one party is an individual who acquires goods or services wholly or predominantly for personal, domestic or household use; and
- the factors to be considered, when deciding whether a contract is a ‘standard form’ contract, will be amended so that ‘lightly’ negotiated contracts are likely to be caught.