The Government is strengthening protections for consumers and small businesses against unfair contract terms.
Treasury previously consulted on a draft Regulation Impact Statement. The final Regulation Impact Statement and stakeholder submissions are available.
Commonwealth, state and territory consumer ministers agreed to proceed with reforms in November 2020, including to:
- make UCTs unlawful and give courts the power to impose a civil penalty;
- provide more flexible remedies to a court when it declares a contract term unfair by:
- giving courts the power to determine an appropriate remedy, rather than the term being automatically void;
- clarifying that the remedies available for ‘non-party consumers’ also apply to ‘non-party small businesses’; and
- creating a rebuttable presumption provision for UCTs used in similar circumstances;
- increase the eligibility threshold for the protections from less than 20 employees to less than 100 employees, and introduce an annual turnover threshold of less than $10 million as an alternative threshold for determining eligibility;
- remove the requirement for the upfront price payable under a contract to be below a certain threshold in order for the contract to be covered by the UCT protections;
- improve clarity around the definition of standard-form contract, by providing further certainty on factors such as repeat usage of a contract template, and whether the small business had an effective opportunity to negotiate the contract; and
- enable certain clauses that include ‘minimum standards’ or other industry-specific requirements contained in relevant Commonwealth, state or territory legislation to be exempt from the protections.
This exposure draft legislation would amend the Australian Consumer Law and the Australian Securities and Investments Commission Act 2001 to implement the agreed reforms.
Changes relative to what was consulted on previously include:
- Retaining the current automatic voiding provisions in the law. That is, if a court finds a term in a standard form consumer or small business contract is unfair, that term is considered void under the law, without the need for further action or orders to be made. (Previous consultation considered removing these provisions from the law.)
- Streamlining the court’s power to make orders to void, vary or refuse to enforce part or all of a contract (or collateral arrangement).
- Clarifying the court’s power to make orders that apply to any existing consumer or small business standard form contracts entered into by a respondent (whether or not that contract is put before the court) that contains an unfair contract term that is the same or substantially similar to a term the court has declared to be an unfair contract term.
- Clarifying the court’s power to issue injunctions against a respondent with respect to existing or future consumer or small business standard form contracts entered into by a respondent, containing a term that is the same or is substantially the same as a term the court has declared to be an unfair contract term.
The Government is seeking stakeholder views on the exposure draft legislation and explanatory materials.
Public consultation on the exposure draft legislation and explanatory materials will close on 20 September 2021.