Penalties of up to $2.5 Million to Apply to Companies Relying Upon Unfair Contract Terms

As of 10 November 2023, a new unfair contract term (‘UCT’) regime will take effect in Australia. The Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 attained royal assent on 9 November 2022 and introduces a range of changes to the Competition and Consumer Act 2010 and the Australian Securities and Investments Commission Act 2001 (Cth).

Changes

• Broader definition of ‘small business’
  The UCT regime applies to standard form consumer contracts and small business contracts. Previously a ‘small business’ was an entity that employed less than 20 people. Under the new regime the definition expands to an entity that employs less than 100 people OR has a turnover of less than $10 million in the previous income year.
• Increased civil penalties
  Maximum penalties for companies in breach of the CCA have been increased to the greater of:
  
  • $50 million;
  • 3x the value of the benefit obtained (if it can be determined); or

  • 30% of the company’s turnover during the period of the breach.
  The maximum penalty for individuals in breach of the CCA has been increased to $2.5 million.
• Greater powers of the courts
  The Court has new powers, including to:
  • void, vary or refuse enforcement of a contract
  • order an injunction to prevent a party from relying upon an unfair term or contract in the future; and
  • determine whether a contract is a ‘standard form contract’ despite limited or unsubstantial opportunities to negotiate, the selection of a term from a pre-determined range, or linked negotiations for other contracts.
• Penalties for relying on unfair terms
  Under the previous regime, unfair terms were void and unenforceable but attracted no additional penalties. Under the new amendments, an entity is prohibited from entering into a contract with an unfair term and/or relying upon an unfair term; breach may attract penalties. The maximum penalty for a company that breaches these new prohibitions is $2.5 million.

What can you do to avoid being found guilty of unfair contract term use?

• If your business relies on standard terms and conditions or standard form contracts, engage a lawyer to review those terms and ensure they comply with the current and impending regime.

How can DSA Law help you?

If you require assistance in determining whether the new regime affects you, or whether a contractual term is enforceable, please reach out to the Commercial Law Team at DSA Law on (03) 8595 9580 or visit DSA Law.