Motor dealers and manufacturers in New South Wales will need to
review their contracts for a new measure of unfairness in light of
the new Motor Dealers and Repairers Act 2013 (NSW) (Act).
The legislation commenced on 27 November 2013 and deals with unfair
terms and unjust conduct in contracts for the supply of motor
vehicles by manufacturers to motor dealers.
Under the Act, a term of a supply contract, which is likely to
include a dealership agreement, is unfair if it:
would cause a significant imbalance in the parties' rights
and obligations arising under the contract;
is not reasonably necessary in order to protect the legitimate
interests of the party who would be advantaged by the term;
would cause detriment to a party if it were to be relied
The Act has been criticised for being inconsistent and
unnecessary in light of the Franchising Code of Conduct (Code). The
Code deems dealership agreements to be franchise agreements and
itself provides for extensive regulation of such agreements and
arrangements, including dispute resolution.
While the legislation was enacted to cut red tape in the
industry, it appears that it might in fact increase the burden on
motor dealers and manufacturers and impinge on their rights to
enter into contracts on their own terms.
Examples under the Act of unfair terms include terms that have
the effect of permitting one party but not the other to:
avoid or limit performance of the contract;
terminate the contract; or
vary the terms of the contract.
The Act gives further examples of unfair terms including terms
that unreasonably limit assignment by the motor dealer of the motor
dealer's rights under the contract or the sale of a motor
dealer's business or terms that allow either party to
unilaterally vary the characteristics of goods to be supplied under
The examples provided for in the Act are often found in
dealership agreements to cater for the nature of the industry and
common arrangements with third parties such as manufacturers.
Jurisdiction to hear matters relating to unfair contract terms
and unjust contracts is conferred on the Consumer, Trader and
Tenancy Tribunal. The Act allows a motor dealer, a motor industry
group or the Small Business Commissioner to apply to the Tribunal
for a declaration that a term of a supply contract is unfair or
that the conduct of a manufacturer is unjust.
If the Tribunal determines that a term is unfair, it has the
power to make:
an order declaring the contract to be void in whole or in
an order varying any term of the contract;
an order directing a party to the contract to take, or not
take, specific actions relating to the subject matter of the
an order directing a party to the contract to pay an amount of
compensation to the other party; or
any other consequential or ancillary orders it thinks fit.
New South Wales motor dealers and manufacturers should be aware
of the new measures and ensure their contracts aren't unfair or
Winner – EOWA Employer of Choice for Women Citation 2009,
2010, 2011 and 2012
Winner – ALB Gold Employer of Choice 2011 and 2012
Finalist – ALB Australasian Law Awards 2008, 2010, 2011 and
2012 (Best Brisbane Firm)
Winner – BRW Client Choice Awards 2009 and 2010 - Best
Australian Law Firm (revenue less than $50m)
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In response to growing interest in the commercial use of drones or RPAs in Australia, CASA has developed new regulations.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).