The Federal Government has introduced into Parliament its
proposed legislation to prohibit unfair contract terms.
The prohibition against unfair contract terms has been
significantly narrowed and now excludes standard form contracts
used in business to business dealings.
Australian consumer law – unfair contract terms
In our e-Alert! National Prohibition of Unfair Contract
Terms, dated 27 May 2009, we outlined the Federal
Government's proposed unfair contract terms law, detailed in
the Draft Exposure Bill of the Trade Practices Amendment
(Australian Consumer Law) Bill 2009 (Draft Exposure Bill).
The Federal Government has now introduced the new Trade
Practices Amendment (Australian Consumer Law) Bill 2009 (Bill)
into Parliament. The Bill, which will amend both the Trade
Practices Act 1974 and the Australian Securities and
Investment Commission Act 2001(ASIC Act), significantly
narrows the prohibition against unfair contract terms compared to
the Draft Exposure Bill.
The prohibition against unfair contract terms will now apply
only to unfair terms in standard form contracts for the supply to
an individual of goods or services (including financial services),
or a sale or grant of an interest in land where that supply, sale
or grant is wholly or predominantly for personal, domestic or
household use or consumption.
As a result of this legislative amendment, standard form
contracts used in business to business dealings (including
franchise agreements and business loans) will fall outside the
scope of the new prohibition.
The Bill has also expanded the exemptions previously available
under the earlier Draft Exposure Bill and now expressly exempts
contracts that establish the constitution of a company, a managed
investment scheme or other similar body.
The Bill introduces pecuniary penalties for contraventions of
the unfair contract terms provisions of the Australian Consumer Law
and the ASIC Act. Those penalties will be up to $27,500 for
companies and $5,500 for individuals.
The Senate has referred the Bill to the Senate Economics
Legislation Committee which is seeking submissions from interested
individuals and organisations. The closing date for submissions is
31 July 2009. The Committee is due to report by 7 September
All businesses which regularly use standard form contracts to
supply individuals with goods or services which are acquired for
personal, domestic or household use or consumption, should review
the terms of their contracts to ensure compliance with the
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.
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On 12th November 2016, new laws will commence to protect small businesses from unfair terms in standard form contracts.
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