Dec 19, 2016
Recent changes to the Australian Consumer Law mean that small businesses are now afforded similar benefits to those available to individual consumers under the “unfair contract terms” provisions of the Australian Consumer Law.
Suppliers of goods and services, as well as individual and small business consumers, should be aware of their current rights and obligations under these laws.
When do the unfair contract terms provisions apply?
The “unfair contract terms” provisions (UCT) are an important component of the Australian Consumer Law (the national framework of laws which provides a range of protections for Australian consumers). The UCT aims to ensure that standard form contracts used for the supply of goods or services by Australian businesses do not contain terms and conditions which are unfair to consumers.
The UCT only applies to standard form contracts. Standard form contracts are those which are prepared by one party and not negotiated by the other party ie offered on a “take it or leave it” basis. Standard form contracts are frequently used by suppliers who deal with multiple customers, such as telecommunications service providers, utility companies, franchisors, car rental companies and travel agencies.
Previously the UCT only applied to contracts for the supply of goods and services to individuals for personal, household or domestic use or consumption. However, recent amendments to the law have extended the UCT to contracts for the supply of goods or services to small business customers (defined below).
Any standard form contract with a small business customer entered into or renewed on or after 12 November 2016 will be subject to the UCT.
What makes a contract term “unfair”?
A term of a consumer contract will be unfair if it:
- Causes a significant imbalance in the parties’ respective rights and obligations; and
- Is not reasonably necessary to protect the legitimate interests of the party who is advantaged by the clause; and
- Would cause financial or other detriment to a party if applied or relied upon.
Examples of provisions which may be unfair under the UCT are:
- Clauses which allow one party (and not the other) to avoid or limit performance of the contract eg a limitation of liability clause;
- Clauses providing for immediate termination of the contract or penalties for any breach, including minor or inconsequential defaults;
- Terms which limit the customer’s rights to terminate the contract;
- Unilateral rights to vary the contract or incorporate additional terms.
Do the Unfair Contract Terms provisions apply to me?
If you are:
- a business who supplies goods or services and you use standard form contract terms; or
- an individual who acquires goods or services for personal, domestic or household use under the supplier’s standard form contract; or
- a business who employs less than 20 people and you acquire goods or services valued under $300,000 (or $1 million if the contract lasts more than 12 months) under the supplier’s standard form contract,
then the UCT will apply to your contract(s).
What does this mean for me?
If you are a supplier of goods or services to any of the customers described above, then you should have any standard form contract terms and conditions legally reviewed (and revised if necessary) to ensure that they do not contain unfair provisions. If you fail to do so, then you face the risk that those provisions (and potentially your entire contract) will be declared by a court to be unfair and consequently void and unenforceable.
If you fall within one of the customer categories above and think that your contract may contain an unfair term, then you should:
- if circumstances permit, ask the other party to remove or amend the unfair term;
- contact Consumer Affairs Victoria or the ACCC; or
- seek legal advice to discuss your options.
In addition to the UCT, the Australian Consumer Law applies a range of consumer protection measures with which Australian suppliers of goods and services must comply. These include consumer guarantees, sales practices, and penalties for unfair business practices.
The experienced lawyers at Your Law Firm can provide any guidance or advice you seek in relation to the UCT and other matters related to the Australian Consumer Law.
Article Written By: Samantha Siebel