New penalty regime – Are your business standard terms and conditions fair?

New penalty regime – Are your business standard terms and conditions fair?

There have been recent changes to the Australian competition and consumer law which came into effect on 9 November 2023. Businesses have 12 months in which to bring their contracts up-to-date to ensure compliance before the penalty regime applies (see below).

The changes can be summarised as an effort to further protect consumers and deter the use of unfair contract terms. The key takeaway to be aware of is that to propose and rely on an unfair contract term is now an offence and civil penalties can be imposed.

What is an unfair term?
An unfair contract term is one that:
• causes a significant imbalance in the rights and obligations of the parties;
• is not reasonably necessary to protect the legitimate interests of the party seeking to rely on it; and
• causes financial or other detriment to one party if the other party seeks to rely on it.
Further, this may include terms that enable one party (and not the other) to:
• avoid or limit their obligations under the contract;
• terminate the contract;
• penalise the other party for breaching or terminating the contract; or
• vary the terms of the contract.

Where an unfair contract term is found to be proposed, applied or relied on, the penalties imposed can be:
• for an individual, up to $2.5 million; or
• for a company, up to the greater of:
o $50 million;
o 3 times the value of benefit from the contravention; or
o where benefit cannot be determined, 30% of adjusted turnover during the breach turnover period.

The penalty regime establishes a significant financial risk to businesses should an unfair contract term be found to exist within a contract.

The role of ‘standard form’ contracts
Standard form contracts are widely utilised as they provide a quick and efficient way to formalise an agreement. These contracts are made up of terms that are often subject to little or no negotiation. If your business uses a standard form contract, then now is the time to have it reviewed.

We recommend that in the first instance you discuss your situation with us in our SmartMove initial 30-minute discounted consultation (in person or by telephone), which we offer for just $80 and which can be booked through our website or by simply getting in touch. Austral Legal. Practical advice