Countdown to Compliance: One Week to Adapt to Australia’s New Unfair Contract Terms Regime

Australia’s unfair contract terms (UCT) regime is designed to protect consumers and small businesses from unfair contract terms in certain ‘standard form’ contracts.

On 9 November 2023 significant changes to the UCT regime will take effect and, among other things, the range of contracts that fall within the operation of the regime under the Australian Consumer Law and the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act) will be expanded.

Notably, the changes include broadening what constitutes a small business contract.  Under the Australian Consumer Law, the UCT regime may apply to standard form business contracts where one party to the contract:

• employs fewer than 100 persons; and/or
• has a turnover of less than $10 million for the last income year that ended before or at the time the contract is made.

Similar changes will apply under the ASIC Act, although there is an additional requirement for the upfront price payable under the relevant contract to be $5million or less (excluding interest).

Further, Courts will have additional powers in relation to contracts that contain unfair terms under the UCT regime, including the ability to impose significant financial penalties.  For example, companies that breach the UCT regime under the Australian Consumer Law could incur a maximum financial penalty that is the greater of:

• $50 million;
• three times the value of the benefit obtained from the breach; and
• if the value of the benefit cannot be determined, 30% of the company’s (adjusted) turnover during the period the breach occurred (with a minimum of 12 months).

If your business uses standard form consumer contracts or small business contracts, now is the time to act.

If you need assistance to ensure your business complies with the UCT regime, please call Sierra Legal.