News & Insights

The upcoming changes to the “Unfair Contract Term” (UCT) regimes under the Competition and Consumer Act 2010 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) have been well-publicised and will start in November 2023.

What will the new regimes mean for business?

Many articles have been written, many seminars presented, and many businesses now know the regimes’ objectives.  Particularly:

1. the wider scope of application, with UCT laws applying to significantly more consumers, small businesses and transactions. This will be done through changes to definitions, employee headcount and monetary thresholds;
2. more indicia added to help define what constitutes a ‘standard form’ contract;
3. more specific contraventions, with each individual UCT, and each instance of the business relying (or purporting to) on it, constituting a separate contravention;
4. the wider scope of consequences, with the Courts gaining more far-reaching powers; and
5. higher penalties for breach (of course!).

But there are other aspects of the new laws that aren’t getting the same attention – and these could cost your business royally. These are:

• wider availability of remedies to non-parties; and
• additional reporting consequences.

Application and availability of remedies to non-parties

Under the expanded UCT regime, many of the Court’s additional powers and penalties can be sought:

• To apply to the business’ other contracts with its other consumer or small business customers. This can be if those other contracts contain clauses the same as (or similar to) the term declared as a UCT. The other consumers and small businesses do NOT need to be a party to the matter before the Courts.
• For those other similar contracts and customers at any time within 6 years from the date the term was first declared as a UCT.
• To bind a person ‘affected’ by the order, even if that person was NOT a party to the original proceedings (eg. a subsequent purchaser of the business).

The Court’s additional powers and penalties will also include:

• orders to prevent the same (or similar) term from being used in any future contracts (whether with the relevant party or with any other party);
• orders for redress to compensate or prevent loss or damage to any third parties who have a contract with the business containing a term the same as (or similar to) the term declared as a UCT;
• injunctions to prevent use of (or reliance on) UCTs in similar contracts with third parties;
• public warning notices;
• adverse publicity orders; and
• disqualification orders.

Additional reporting

For businesses licensed under regulatory regimes (eg. hold an Australian Financial Services Licence), contravention of the UCT regime may constitute a reportable incident. It may also invoke a separate investigation, prosecution or administrative action for failure of the business’ core disclosure or conduct obligations under that applicable licensing regime.

Assume your contracts are caught

With the significantly expanded regimes, it is estimated that some 98% of small businesses will now be afforded UCT protections.

The expanded powers and remedies available to the Courts also mean that the risk to your business is not over once the immediate penalty for the UCT has been paid or resolved. The risk can still hang about for 6 years, and endure across the sale of your business contract assets.

For further information about the UCT regime, to review your contracts, or for advice on how to mitigate your business’ exposure, please contact one of our experts.