Important proposed expansion of small business unfair contract regime

30 January 2020

Background

The Australian Consumer Law prohibits the use of unfair contract terms in certain standard form small business contracts.   The Government is now consulting on proposed amendments which will, amongst other things, extend the regime to a substantially wider range of businesses and contracts, and introduce penalties for non-compliance.

 

Proposed changes

On 13 December 2019, the Government released a consultation paper to seek stakeholders’ views about proposed amendments following a review of the current legislation by the ACCC. 

The key proposals are:

  • extending the regime to contracts with businesses with a turnover of less than $10 million (currently the threshold is a business with less than 20 employees);
  • extending the regime to contracts with an upfront price of up to $5 million (currently $300,000 for contracts of less than 12 months or otherwise $1 million);
  • imposing significant financial penalties upon businesses who breach the regime by including unfair terms in contracts. Currently the effect of the law is simply to render any unfair terms void.  The introduction of penalties will have significant implications for business risks given the inherent uncertainty in determining what is a standard form contract and when a term is unfair;
  • empowering the court to order a broad range of remedies for any contravention including varying the future application of any unfair terms;
  • including additional guidance on how to determine what is a standard form contract such as the extent to which the contract has been used repeatedly.

 

Next steps

The consultation period closes on 16 March 2020 following which we are likely to see an amending bill introduced. 

Submissions can be made at https://consult.treasury.gov.au/.  If you would like to discuss the proposed changes in more detail or making a submission please do not hesitate to contact Paul Dugan or Kylie Dunn.

 

This article provides general comments only. It does not purport to be legal advice. Before acting on the basis of any material contained in this article, we recommend that you seek professional advice.

 

Authors:

Paul Dugan, Principal in our Disputes Team

Contact
Email: pdugan@dmawlawyers.com.au
Direct Telephone:  +61 8 8210 2266

 

Kylie Dunn, Senior Associate in our Disputes Team

Contact
Email: kdunn@dmawlawyers.com.au
Direct Telephone:  +61 8 8210 2286