The Australian Government is currently contemplating major changes to the protections against unfair contract terms found in the Australian Consumer Law.
These proposed changes have the potential to greatly widen the protections afforded to consumers and small businesses surrounding unfair terms within standard form contracts.
Currently, the protection against unfair terms deems ‘consumer contracts’ and ‘small business contracts’ as void if one of the terms is unfair; the contract is a standard form contract; and the contract cannot continue without the unfair term.
Standard form contracts are commonly used across Australia when conducting business. Sometimes referred to as ‘boilerplate’, standard form contracts are agreements which are pre-prepared with little or no negotiation between the parties. These contracts typically make up many of the take-it-or-leave-it agreements which consumers and businesses engage in daily.
To qualify as a consumer or small business contract, at least one of the parties to the contract must be either an individual entering into the agreement for a personal, domestic or household purpose or a small business.
One of the changes proposed by the Government is the widening of the meaning of ‘small business’. Currently a small business is a business employing less than 20 employees. Under the changes a small business will include businesses employing less than 100 employees with a turnover of less than $10,000,000 in the last financial year.
A monetary penalty for those who attempt to rely on an unfair contractual term is also proposed. Monetary penalties cannot currently be given under the existing law. The proposed monetary penalties for a contravention of this kind could be upwards of hundreds of thousands of dollars.
Under the proposed amendments, the Court will be able to grant orders to reduce or prevent the loss being caused by an unfair term. Another new power for the Court is the power to grant an injunction to prevent parties from entering into agreements which contain terms which are the same or similar to terms deemed unfair.
A host of other changes are proposed by the Government.
Should these changes be put into force, the scope of contracts which are covered by unfair term protection will be greatly increased. This, combined with the potential increased penalties for contravention, provides greater incentive for businesses to ensure their contracts do not contain unfair terms.
These changes also significantly widen the remedies available to consumers and small businesses should they be aggrieved by a contravention.
The Government is currently in the processing of receiving views from stakeholders on the proposed amendments. Submissions were open until 20 September 2021. After submissions close, the Government will consider moving forward with the proposed amendments.
While the future of these proposed changes is uncertain, consumers and businesses alike should make note to keep an eye on any future developments.