Major changes are coming into effect on 10 November 2023 for unfair contract terms under the Competition and Consumer Act 2010 (Commonwealth).
Any businesses that deal with:
- consumers;
- small businesses under 100 employees or under $10 million annual turnover,
need to review their existing contracts for compliance before the changes apply, because unfair standard form contracts will illegal with increased maximum penalties.
Unfair standard form contracts will be illegal
Unfair contract terms laws have been in place for a while, but most businesses took a relaxed approach because if found to be unfair, the term would merely be void and unenforceable.
Under the new laws, they will be illegal and can result in penalties. For companies, this could be the greater of $50 million or turnover based. For individuals, the maximum penalty is $2.5 million.
Clarification on ‘standard form’ contracts
The laws apply to ‘standard form’ contracts, e.g. contracts that are pre-written and not normally negotiated. The opportunity to negotiate or minor changes in negotiations, will not be sufficient for a contract to fall out of the ‘standard form’ category.
Many businesses will be using outdated templates for their service agreements and website terms and conditions in particular, which should be reviewed.
What could be considered unfair terms?
The definition of unfair contract terms is broad but some examples of common, high risk terms that could be considered unfair include:
- automatic renewals with no notice
- one-sided termination or broad suspension clauses
- excessive exit or data migration fees
- one-sided limitation of liability or low caps on liability
- one-sided variation clauses
- right for a party to increase fees with no right to terminate
- no refunds for unused services
Key take-aways
Make sure to get your contracts reviewed annually, or earlier when major changes like this apply. We offer fixed fee reviews, so compliance is accessible for all businesses. Book a free consultation today or contact us.
