The Unfair Contract Terms (UCT) provisions of the Competition and Consumer Act have now commenced, but it is not too late to act. Businesses will now be guilty of illegal conduct and subject to substantial penalties and fines for entering into (or even if offering) standard form contracts that contain Unfair Contract Terms.
Don’t just assume that you are compliant. The changes expand the types of contract and the entities to which the new provisions apply, as well as addressing additional terms which may be regarded as unfair. Agreements which were acceptable 12 months ago may now be invalid, unenforceable and in breach of the new requirements. In addition to being unable to enforce the contract, a business could be subject to penalties of to $50M (for each unfair term), 3 times the value of the breach or 30% of adjusted turnover.
Many contracts can be provided in standard form, such as website terms, standard terms of trade, leases, loan documents and membership agreements.
Examples of some of the contracts which will be caught and should now be reviewed are for:
- clubs, accommodation venues and gyms – standard agreements could include membership or loyalty agreements and booking terms.
- retailers – terms of sale, return policies, and warranties/guarantees may be relevant.
- schools and colleges – enrolment agreements and agreements for extra-curricular activities, including travel and waivers.
Most agreements with service providers will also be subject to the new requirements as will most online contracts, including those where a party must tick a box to accept terms and conditions. Any agreement which incorporates additional terms through policies or supplementary documents (particularly where difficult to locate) that can be unilaterally varied without notice/remedy should also be considered.
The ACCC has flagged its intention to take action. In a recent Federal Court case which it brought against Fujifilm (see [2022] FCA 928), the ACCC commented that it took action because Fuji’s standard agreement allowed it to impose “unnecessary and unjustifiable terms” on the business it had contracted with. The ACCC pointed to 38 separate unfair contract terms in its standard-form small business contracts. Those included terms which have previously been routinely included in commercial agreements – including terms which provided for:
- automatic renewal,
- unilateral variation,
- cap on liability and limitation of liability,
- broad indemnity provisions,
- unfair warranty,
- incorporation of supplementary documents,
- disproportionate termination rights and payment on termination.
Further detail of the types of agreements that may be caught and the changes which are to commence are set out in our previous article which you can find at this link https://www.mullinslawyers.com.au/resources/life-isnt-fair-but-your-proforma-contracts-must-be-have-you-reviewed-yours-before-the-law-changes/.
Any agreements or renewals of existing agreements will be caught from today. So, if you aren’t sure whether the changes apply to you, if you haven’t considered this yet, haven’t reviewed your standard terms in the last 12 months, or are about to enter into or have agreements with providers which are due for renewal, then don’t delay.
