The Government has introduced the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 into the House of Representatives to make unfair contract terms unlawful and introduce civil penalty provisions prohibiting the use of, and reliance on, unfair terms in standard form contracts in the Australian Consumer Law and the ASIC Act.
The small business eligibility threshold for the protections will be increased.
Under the ACL, the unfair contract terms protections will apply to a small business contract if one party to the contract is a business that employs fewer than 100 persons or has a turnover for the last income year of less than $10,000,000.
Under the ASIC Act, the protections will apply to a small business contract if the upfront price payable does not exceed $5,000,000, and one party to the contract employs fewer than 100 persons or has a turnover for the last income year of less than $10,000,000.
Under both the ACL and ASIC Act part-time employees are to be counted as an appropriate fraction of a full-time equivalent employee.
A contract may be determined to be a standard form contract despite there being an opportunity for:
• a party to negotiate changes to contract terms that are minor or insubstantial in effect;
• a party to select a term from a range of options determined by another party; or
• a party to another contract or proposed contract to negotiate terms of the other contract or proposed contract.
The new maximum penalty for breach of a relevant offence or civil penalty provision by a body corporate will be the greatest of:
• $50 million;
• if the court can determine the value of the benefit obtained—three times the value of that benefit; or
• if the court cannot determine the value of the benefit obtained—30% of the body corporate’s adjusted turnover during the breach turnover period for the offence, act or omission.
If the Bill passes, the changes to penalties and fines will come into effect upon Royal Assent.
The changes to the unfair contract terms regime will come into effect 12 months after Royal Assent, giving businesses a year to review and amend their standard form contracts before penalties for unfair terms apply.
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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
