Unfair contract terms resource centre

 
Significant changes to the unfair contract terms (UCT) regimes for business contracts and financial products are now in place. These changes have broadened the scope of contracts captured by the regime and introduced significant civil penalties. Businesses that use or enter into standard form contracts are likely to be impacted by the UCT laws.
Presentation

Our team delivered a presentation to clients about how they can best prepare their business, discussing the key changes to the laws and providing an overview of the types of terms that may be held to be unfair.

Podcast

Suzie Leask, James Deady and Mark Lebbon outline the key changes to the UCT regime, which include significant civil penalties and an increase in the number of businesses that these laws will apply to, and offer tips for businesses in a special podcast episode, ‘New UCT regime: are you ready?’.

Business contracts

The impact of the new UCT laws on business contracts

The Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) was passed in November 2022, significantly expanding the scope of the UCT regime under the Australian Consumer Law (ACL) in the Competition and Consumer Act 2010 (Cth) (Act).

Broader application to cover more contracts

From 9 November 2023, the UCT regime will apply to standard form business contracts where at least one party satisfies either of the following:

  • it has fewer than 100 employees (currently fewer than 20 employees); or
  • less than $10 million in annual turnover during the previous financial year.

This expands the scope of the UCT regime to include an even broader range of business contracts and will affect business-to-business contracts throughout the supply chain.

Introduction of significant penalties and expanded court power

In addition to expanding the scope of the regime, the changes also increase the risk profile of including potentially unfair terms in standard form contracts. From 9 November 2023, businesses can receive penalties for contravention of the UCT provisions, with each UCT contained in a contract a separate contravention (making the combined pecuniary penalty potentially very large). Notably, it will be prohibited to:

  • make a contract with a UCT (if the UCT was proposed by that person); or
  • apply or rely on (or purport to apply or rely on) a UCT.

In alignment with the recently updated maximum penalties in the Act, the new penalties can be up to $2.5 million for individuals, and for corporations the greater of:

  • $50 million;
  • three times the benefit obtained and reasonably attributable to the breach, if that can be determined; or
  • if the value of the benefit cannot be determined, 30% of the corporation’s adjusted turnover during the breach turnover period.

The expanded regime will apply to standard form contracts entered into, renewed or varied from 9 November 2023.

 

What you have to do: our key tips

  • All businesses, whether large or small, should review their contracts and assess whether their standard form contracts comply with the relevant changes to the UCT regime before the November deadline.
  • Consider how template documents are presented to suppliers, customers and clients during an organisation’s sales and contracting processes.
  • Much like other areas of competition law (such as the cartel and misleading and deceptive conduct prohibitions) businesses should prepare to include the UCT regime as a key part of staff and executive training and risk management decisions.

Financial products

The impact of the new UCT laws on financial products

The Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) was passed in November 2022, significantly expanding the scope of the UCT regime under the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).

Broader application to cover more financial products

From 9 November 2023, the UCT regime will apply to financial products that are standard-form small business contracts where the upfront price does not exceed $5 million and where at least one party has:

  • fewer than 100 employees (currently fewer than 20 employees); or
  • less than $10 million in annual turnover during the previous financial year.

This expands the scope of the UCT regime to include an even broader range of financial products.

Introduction of significant penalties and expanded court power

As with the changes to the Australian Consumer Law (ACL) UCT regime, the ASIC Act UCT regime contains significantly enhanced penalties for contraventions of the UCT regime.

The maximum penalty for corporations for a contravention is the greater of:

  • 50,000 penalty units (currently $15.65 million);
  • The amount of the benefit derived or detriment avoided multiplied by three; or
  • 10% of annual turnover subject to a cap of 2.5 million penalty units (currently $782.5 million).

Learn more about unfair contract terms for financial products and the potential risks for insurance contracts.

How we can help you

Our team can help you identify what you need to do to ensure your standard form contracts are compliant. We have significant experience working with businesses to minimise regulatory risk under the Australian Consumer Law and the ASIC Act in relation to standard terms of trade and business contracts, as well as assisting businesses with tailored training and policy documentation addressing these matters.

Featured thinking

Key contacts

Mark is an experienced corporate & commercial lawyer with a particular focus on the sports and media industries.

James Deady

Partner & Technology and Digital Economy Co-Lead

Head of Technology and digital economy

James is an commercial lawyer specialising in technology procurement, privacy, data security and intellectual property matters.

Suzie is experienced in a broad range of areas including, business transactions, corporate advisory, commercial contracts, IT and intellectual...

Kurt is a commercial and projects lawyer with experience assisting clients on corporate and commercial matters across a range...

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