The Consumer Affairs Minister, Chris Bowen MP, has outlined the details of the unfair contract terms law relating to standard-form contracts.

The national unfair contract terms provisions include the following key features:

• it will be implemented as part of the Australian Consumer Law and as part of the Australian Securities and Investments Commission Act, in respect of financial services;
• it will relate only to standard-form contracts;
• a term is ‘unfair’ when it causes a significant imbalance in the parties’ rights and obligations arising under the contract and it is not reasonably necessary to protect the legitimate interests of the supplier;
• a court must have regard to any detriment or substantial likelihood of detriment, the transparency of the term and the contract as a whole in determining whether a term is ‘unfair’;
• certain terms will not be able to be challenged under these provisions which relate to:
  • the main subject matter of the standard-form contract;
  • the upfront price payable under the standard-form contract;
  • terms required, or expressly permitted, by a law of the Commonwealth or a State or Territory’;
• a non-exhaustive, indicative menu of types of terms that may considered to be unfair; and
• a power to prohibit terms in a standard-form contract that are considered to be unfair in all circumstances.

The refinements to the unfair contract terms provisions include:

• an exclusion of a standard-form contract where the upfront price payable for the services (including financial services), good or land supplied under the contract exceeds $2 million;
• an exclusion of standard-form contracts that are shipping contracts, and are the constitutions of companies, managed investment schemes or other kinds of bodies.

The new unfair contract terms law will apply to all:

• new standard-form contracts entered into on or after the commencement date; and
• contracts that are renewed or varied on or after the commencement date, to the extent of the renewal or variation in respect of conduct taking place after the date of renewal or variation.

The Government intends that the new law should commence on 1 January 2010.