The Australian Consumer Law (ACL) includes national unfair contract terms laws covering standard form consumer and small business contracts, a national law guaranteeing consumer rights when buying goods and services, penalties, enforcement powers and consumer redress options.
In 2020 the Federal Government passed amendments to the ACL, which will see changes to some key areas for businesses.
This is the second and final blog in our series to help guide you through these changes. In this blog we look at Unfair Contract Terms for Small Business Contracts.
When was the last time you reviewed your standard template contracts for engagement of your subcontractors and/or consultants? Well, it might be time to complete that review – because the laws for unfair contract terms are due to change, and this may also see some new penalties apply.
As you may recall, the unfair contract terms laws was extended last year to cover general insurance (eg, home and contents insurance, life insurance, car insurance and travel insurance), which is due to commence from 5 April 2021.
However, some further changes are expected to occur in 2021, by amending the Australian Consumer Law, Australian Securities and Investments Commission Act 2001 (Cth) and relevant State and Territory legislation to unfair contract terms which include:
- The definition of a small business contract is due to be expanded so that there is no limit on the upfront price under the contract and a small business will be a business who employ up to 100 people (increased from 20 people) with an annual turnover of not more than $10m (increased from $1m). This will now capture more businesses as a small business, which means that more businesses need to review their contracts without delay.
- It is expected that we will see larger civil penalties being introduced. If the current penalties for contravention of the Australian Consumer Law was to apply, that would see a maximum penalty of $10m per contravention or three times the value of any benefit from the breach (or where the value cannot be determined, it will be 10% of the Australian turnover the preceding 12 months).
- The Courts will also be given greater power to determine the appropriate remedy, which will not always be that the contract should be voided. The Courts’ determination may see some remedies which will significantly disadvantage the small business who imposes these unfair provisions so these should be carefully considered as sometimes this may be more detrimental to a business than simply ending the contract.
- The introduction of the rebuttable presumption will see parties allowed to introduce evidence if that of a similar term is deemed unfair in a separate matter (but must be a similar term or industry), then it is likely that the Court can rely on that decision to determine the term as unfair in the current contract. This introduction is seen as an important step to assist claimants more easily prove that the term is unfair.
- The amendments to the law will also see some clarity provided to standard form That is, some conduct will be clarified as not being an effective opportunity to negotiate the terms of the contract while other conduct such as repeat usage of a contract will be a factor evidencing that a contract is a standard form contract.
We will keep an eye on any updates regarding the amendments to be made, but in the meantime, we would recommend you start to review your standard form contracts.
Speak to us today if you would like assistance with your review.