Is your business prepared for the sweeping alterations to Unfair Contract Terms (UCT) mandated by the Australian Competition and Consumer Commission (ACCC)?
These modifications entail substantial enhancements to the existing UCT regulations, marked by more rigorous penalties and meticulous oversight of specific contract terms across a spectrum of business agreements.
The primary aim behind these amendments, particularly the heightened penalties, is to function as a formidable deterrent. Businesses are expected to diligently uphold their commitments, refrain from misleading conduct, and act with utmost fairness towards consumers. Furthermore, these revisions empower the courts to ensure that penalties for contravening competition and consumer standards are not perceived as a mere cost of conducting business but are, regarded as a vital reminder for business owners and shareholders.
In essence, these changes will impact all enterprises that employ standard-form contracts in their interactions with consumers and other small businesses, especially in the contexts of:
- providing goods or services
- selling or leasing real estate
- supplying financial services or products
What are the new changes for Unfair Contract Terms?
Under the Australian Consumer Law (ACL), the UCT regime now extends to small-business contracts when one party to the contract is a business that either:
- employs less than 100 individuals
- reports a turnover of less than $10 million for the previous fiscal year.
Similarly, under the Competition and Consumer Act 2010 (Cth) (the Act), the updated UCT regime encompasses small business contracts under these conditions:
- one party to the contract is a business that either:
- employs less than 100 people
- reports a turnover of less than $10 million for the last fiscal year
- the upfront price payable under the contract does not exceed $5 million
The revised penalties under the ACL and the Act are notably substantial. For companies, the penalties have increased to:
- $50 million (previously $10 million)
- three times the value of the benefit to the company if ascertainable
- 30% of the corporation’s turnover during the period of the offense (formerly 10% of the annual turnover only in the 12 months prior to the breach).
Conversely, for individuals, the penalty has surged to $2.5 million (formerly $500,000).
These penalties will exclusively apply to newly executed contracts, renewals, or modifications of existing contracts commencing on or after 9 November 2023.
The transformative nature of these changes bestows new powers upon the courts, including:
- The authority to void, modify, or decline enforcement of a contract if doing so is necessary to prevent foreseeable loss or harm arising from the UCT.
- The capacity to preclude the inclusion of a term similar to one declared as unfair in future standard-form small business or consumer contracts.
- The capability to mitigate potential loss or harm caused by a substantially unfair term.
- The ability to grant injunctive relief to inhibit a party from applying or relying on a term in the contract that has been declared unfair.
- The power to provide injunctive relief restraining a person from entering into future contracts or applying/relying on a term of an existing contract containing a term declared unfair.
Consequently, businesses should anticipate heightened scrutiny from the ACCC concerning UCTs. Both corporations and individuals must examine their contracts meticulously to ensure strict compliance with the new regulations.
If you seek assistance in reviewing your contracts ahead of the impending deadline, please do not hesitate to contact us.
The information provided in this article is for general information and educative purposes in summary form on legal topics which is current at the time it is published. The content does not constitute legal advice or recommendations and should not be relied upon as such. Whilst every care has been taken in the preparation of this article, FC Lawyers cannot accept responsibility for any errors, including those caused by negligence, in the material. We make no representations, statements or warranties about the accuracy or completeness of the information and you should not rely on it. You are advised to make your own independent inquiries regarding the accuracy of any information provided on this website. FC Lawyers does not guarantee, and accepts no legal responsibility whatsoever arising from or in connection to the accuracy, reliability, currency, correctness or completeness of any material contained in this article. Links to third party websites or articles does not constitute any endorsement or approval of those sites or the owners of those sites. Nothing in this article should be construed as granting any licence or right for you to use that content. You should consult the third party’s terms and conditions of use in relation to any third-party content. FC Lawyers disclaims all responsibility and all liability (including liability for negligence) for all expenses, losses, damages and costs you might incur as a result of the information being inaccurate or incomplete in any way. Appropriate legal advice should always be obtained in actual situations.
Prefer to get in touch?
With offices in Brisbane, Sunshine Coast and Sydney, our team is well equipped to provide both advice and support across a broad range of legal areas.