Unfair Contract Terms: Increased Penalties and Expanded Operation

Unfair Contract Terms: Increased Penalties and Expanded Operation

As of 10 November 2023, unfair contract terms will be unlawful and civil penalty provisions prohibiting the use of, and reliance on, unfair terms in standard form contracts will be introduced in the Australian Consumer Law (ACL) and the ASIC Act.
 
Below are some of the changes you should be aware of:

1. Small business eligibility threshold for the protections will be increased.

2. Under the ACL, the unfair contract terms protections will apply to a small business contract if one party to the contract is a business that employs fewer than 100 persons or has a turnover for the last income year of less than $10,000,000. 

3. Under the ASIC Act, the protections will apply to a small business contract if the upfront price payable does not exceed $5,000,000, and one party to the contract employs fewer than 100 persons or has a turnover for the last income year of less than $10,000,000.

4. Under both the ACL and ASIC Act, part-time employees are to be counted as an appropriate fraction of a full-time equivalent employee.

5. A contract may be determined to be a standard form contract despite there being an opportunity for:

• party to negotiate changes to contract terms that are minor or insubstantial in effect;
• party to select a term from a range of options determined by another party; or
• party to another contract or proposed contract to negotiate terms of the other contract or proposed contract.

6. Increased penalties for some conduct, maximum penalties for companies that breach those provisions have increased to the greater of $50,000,000 or three times the value derived from the relevant breach, or, if the value derived from the breach cannot be determined, 30 percent of the company’s turnover during the period it engaged in the conduct.
 
Please get into contact with our office if you require further information on how these changes will potentially affect your business or if you require assistance with ensuring your current contracts do not contain any unlawful unfair contract terms.