ARTICLE
20 November 2023

Critical reforms to unfair contract terms laws in Australia now in force!

CG
Cooper Grace Ward

Contributor

Established in 1980, Cooper Grace Ward is a leading independent law firm in Brisbane with over 20 partners and 200 team members. They offer a wide range of commercial legal services with a focus on corporate, commercial, property, litigation, insurance, tax, and family law. Their specialized team works across various industries, providing exceptional client service and fostering a strong team culture.
The changes impose significant penalties on businesses and individuals for standard form contracts with unfair terms.
Australia Corporate/Commercial Law

The Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) is now in effect, transforming the landscape of unfair contract terms under the Australian Consumer Law.

As of 9 November 2023, new penalties for unfair contract terms are now in force. We previously reported on these changes in late 2022 and urged businesses to promptly review and update their standard form and small business contracts to align with the amended legal framework.

The changes allow courts to impose significant penalties on businesses and individuals who make standard form contracts with unfair terms. This applies irrespective of whether the unfair term is ultimately relied upon, provided it was proposed by the business or individual in question. Previously, a court could only declare specific terms of a contract unfair and therefore void. Proactive compliance is essential, as an individual or business violating the new provisions may incur liability for each proposed unfair term.

Key changes to the unfair contracts regime

Expanded 'small business' definition

The Act widens the 'small business' definition, now covering entities employing fewer than 100 persons or with an annual turnover of up to $10 million.

Threshold elimination

'Small business contracts' are no longer bound by monetary thresholds, opening the scope to any standard form contract for goods or services with a small business.

Penalties for each instance

Courts now have the authority to impose significant penalties for every inclusion, reliance, or proposal of an unfair contract term This is a departure from the previous law, which only permitted courts to void unfair contract terms or prevent their further use.

Penalties

Businesses should be aware that the maximum financial penalties under the new unfair contract terms laws are the greatest of:

  • $50 million
  • three times the value of the 'reasonably attributable' benefit obtained from the conduct (if the court can determine this)
  • if a court cannot determine the benefit, 30 per cent of adjusted turnover during the breach period.

For individuals, the maximum penalty is $2.5 million.

What should businesses do?

Businesses are strongly advised to seek advice and promptly reassess and revise their standard form and small business contracts to align with the revised legal framework. The changes apply to:

  • standard form contracts made or renewed on or after 9 November 2023
  • a term of a contract that is varied or added on or after 9 November 2023.

It is crucial to adopt a proactive approach to compliance, as penalties may be applied for each term and on each occasion of application or enforcement.

© Cooper Grace Ward Lawyers

Cooper Grace Ward is a leading Australian law firm based in Brisbane.

This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More