Changes to Unfair Contract Laws

Thursday, September 21, 2017

There are changes to unfair contract laws that you need to be aware of

Currently:the Australian Consumer Law provisions regarding unfair contract terms only apply to consumer contracts.

The change happening on 12 November 2016: the Australian Consumer Law provisions regarding unfair contract terms will be extended to apply to small business contracts that are entered into, renewed or rolled over after 12 November 2016.

Will your contracts be affected?

The change will affect all standard form contracts involving:

·         a small business;

·         supply of goods/services or sale/grant of an interest in  land; and

·         an upfront price of up to $300,000 (or up to $1,000,000 if it’s for over a year).

Many commercial leases may be affected by the change.

“small business” = less than 20 employees

*  “standard form contract” = a contract prepared by one party with no room for other parties to negotiate the terms

*  Shipping contracts, company constitutions and some insurance contracts are excluded from the new regime.

What are unfair contract terms?

Terms that

·         Cause a significant imbalance in the parties’ rights and obligations;

·         Are not reasonably necessary to protect a party’s legitimate interests; and

·         Cause detriment (financial or otherwise) to a party

are potentially unfair contract terms. Some examples of unfair contract terms are those that only enable one party, but not the other(s), to:

·         Avoid or limit their contractual obligations;

·         Terminate the  contract;

·         Penalise other parties to the Contract for breach or termination; or

·         Vary the contract.

The Consequences

If a Court decides that your contract has an unfair term, it will declare that term to be void and can penalise you in the following ways:

·         Order an injunction to restrain you from acting on the term;

·         Order you to pay compensation or provide redress to consumers that are not even parties to the contract; or

·         Make any other order it thinks is appropriate.

If any of your contracts may be affected by these changes, contact Aherns Lawyers at info@ahernslawyers.com.au and we can review them for you.

 

Disclaimer: This newsletter and any information contained herein are intended for informational purposes only and should not be construed as legal advice. For any legal advice please contact us at info@ahernslawyers.com.au

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