In 2018, the Federal Government undertook a review of the unfair contract terms (UCT) regime and found that the current regime did not provide sufficiently strong deterrence against businesses using unfair terms in standard form contracts. Information gathered in the review also suggested that some aspects of the regime were ambiguous and created difficulties for businesses trying to comply with the law.
The Federal Government has released a draft bill which seeks to address these issues. The Bill proposes to amend the Australian Consumer Law (ACL) and the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act). The proposed new regime will:
Other key proposed changes include:
The rationale behind the proposed changes is to stop larger, more powerful businesses taking advantage of their bargaining power and issuing standard form contracts on a ‘take it or leave it basis’. The changes, and the interaction between the UCT regime and other ACL provisions, such as misleading and deceptive conduct, mean the risk and consequences of non-compliance will both materially increase.
The current UCT regime was recently the subject of Federal Court proceedings, ACCC v Fuji Xerox Australia Pty Ltd. The case provides useful and timely guidance on the types of contract terms that are likely to be considered ‘unfair’. Examples include:
These types of provisions are commonly used in commercial contracts.
While the new UCT regime is not yet law, and may be subject to changes before introduction, businesses using standard form contracts to contract with consumers and small businesses should be careful to ensure those contracts do not contain unfair terms, regardless of what changes may end up being introduced.
Our Corporate & Commercial team regularly advise on commercial contracts and can assist in drafting, reviewing and advising on commercial agreements. If you require any advice, please do not hesitate to contact us.
This article was co-written by Madeline Tait, Lawyer in the Corporate & Commercial Team.
This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice specific to your own situation. Please contact us if you require advice on matters covered by this article.
  FCA 153.