Late last year, the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 passed into law, outlining amendments to the Competition and Consumer Act 2010 (Cth). These amendments include significant changes to the Unfair Contract Terms (UCT) regime, which take effect on November 9, 2023, and prohibit the proposal, application, or reliance on an unfair term in standard form consumer or small business contracts, with substantial penalties applied if this prohibition is breached.
The new amendments introduce heavier pecuniary penalties that will apply from November 9, 2023. The UCT regime applies to standard form contracts with consumers or small businesses, and the amendments expand the meaning of a small business contract while clarifying the scope of a standard form contract.
The test for an unfair term will remain unchanged, with Section 24(1) of the Australian Consumer Law (ACL) setting out a test for determining whether a term is unfair, the matters that a court must consider, and a “grey list” of terms that may be found to be unfair. The three limbs of the test are as follows:
(a) It would cause a significant imbalance in the parties’ rights and obligations arising under the contract.
(b) It is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term.
(c) It would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
Courts will also take into account the extent to which the term is transparent and the contract as a whole, and may also take into account any other matters they deem relevant, as set out in Section 24(2) of the ACL. A term is transparent if it is expressed in reasonably plain language, is legible, is presented clearly, and is readily available to any party affected by the term. However, transparency does not necessarily mean that the term is fair, or vice versa. The grey list in Section 25 of the ACL sets out examples of terms that may be unfair, but it only provides guidance and does not create any presumptions.
Given the complexity and nuances of the law, it would be prudent for you to seek legal advice to ensure that your contracts and terms comply with the relevant laws and regulations. An experienced legal professional can review the specific terms and provide tailored guidance on any potential issues or risks that may arise from the new UCT laws.
Disclaimer: This publication contains comments of a general and introductory nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional legal advice. You should always speak to us and obtain legal advice before taking any action relating to matters raised in this publication.