What will a tougher Unfair Contracts Regime mean for Suppliers? Emerging Trends in Interpretation of Standard Form Contract Protections for Small Business
- Monday, April 8, 2019
In light of growing calls for the introduction of penalties for the unfair terms in standard form contracts.
Partner, Sarah Johnson, examines emerging themes in the consideration of unfair contract terms
Calls for Reform
On 25 January 2019, Labor announced that it plans to make it illegal and impose fines of up to $10 million on suppliers caught putting unfair terms into contracts with small business. This announcement follows a number of recent statements by the ACCC, including by Mr Rod Sims, the Chair of the ACCC, at a speech to the National Small Business Summit in which he stated that the current unfair contracts protections for small business in the Australian Consumer Law have two fundamental problems:
which, Mr Sims stated, means that no real incentive exists for businesses to ensure their standard contracts do not include unfair terms. As recently as 26 February 2019, in a speech to the Committee for Economic Development Australia, Mr Sims confirmed that a key advocacy priority for the ACCC in 2019 is reforming the current unfair contract laws to address these issues.
Given these recent statements and Treasury’s current review of Unfair Contract Term Protections for Small Business, it would appear that there is increasing support for strengthening the Unfair Contracts Regime in the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010) (ACL).
When will a contract term be unfair? The ACL provisions
Unfair contract terms are defined in the ACL as terms that:
The regime applies to standard form contracts where a party to the contract is a business that employs fewer than 20 persons and the upfront price payable under the contract does not exceed $300,000 or $1 million if the contract is for a duration of more than 12 months.
Unfair Contracts Recent Decisions and Undertakings
Whilst section 25 of the ACL sets out examples of the kinds of terms that may be unfair under the ACL, a review of recent ACCC media releases, undertakings by companies and case law in respect of unfair contract terms reveal that the following additional provisions may also be deemed unfair:
If your organisation uses standard form contracts that are likely to be covered by the Unfair Contracts Regime, it might be an opportune time to review the terms of those contracts in preparation for these impending changes.