NEWS

Australian Consumer Law Unfair Contracts Regime in operation from 9 November 2023

In recent years, concerns have been raised as to the sufficiency of Australia’s penalty regime for consumer protection violations of the Australian Consumer Law (ACL), and its provisions regulating unfair contract terms (UCTs). In 2022 the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 was enacted to address those and other penalty matters, foreshadowing operation, and enforcement in 12 months.

The ACCC has had some success modifying unfair contracting practices, with the regime up to now permitting declaratory relief and voiding UCTs, but it has long advocated additional specific contraventions attracting penal and compensatory relief. From 9 November 2023, sections 23 (2A) & (2C) of the ACL (and equivalent provisions in the Australian Securities and Investments Commission Act 2001) prohibit a person:

  • making a contract with; and/or
  • applying, relying, or purporting to apply or rely on,

a UCT in a standard form contract.

In relation to making a contract, liability attaches to persons who propose a UCT. In relation to applying/relying on a contract, liability attaches to anyone who purports to apply or rely on a UCT.

Each UCT is a separate prohibition subject to penalty (section 23(2B)), and the new regime applies in relation to all new contracts entered into, and existing contracts renewed or varied, from 9 November 2023 (section 305 of the ACL). Remedies are expanded, with persons affected by the UCT and the regulator entitled to bring proceedings for compensatory and other relief under sections 243A and 243B of the ACL.

The only limitation on that is The Castle exception – the amendments do not apply to the extent that they would result in an acquisition of property from a person otherwise than on just terms within the meaning of paragraph 51(xxxi) of the Constitution (section 305(6) of the ACL).

The regime continues to apply to standard form contracts, but their scope has been expanded in section 27(3) of the ACL. A contract can be “standard form” despite an opportunity:

  • to negotiate changes that are minor or insubstantial in effect;
  • to select a term from a range of options (this gives effect to recent case law); or
  • for a party to another contract to negotiate terms of the other contract.

The Regime continues to apply to consumer contracts and small business contracts, but is expanded in relation to small business contracts, where the provisions will apply under section 23(4) of the ACL if one party to the contract:

  • is a business that employs fewer than 100 persons (previously 20 persons), or
  • has a turnover for the last income year of less than $10 million irrespective of the value of the contract in issue (previously determined by reference to contract value rather than turnover).

If they have not already done so within the 12 month notification period, all consumer-facing businesses need urgently ensure that their contracting houses are in order now, by reviewing all their standard contract terms, standard form agreements, and processes for negotiating and enforcing those terms and agreements.

The content of this article is intended to provide a general guide to the subject matter. Specific advice should be sought about your specific circumstances.

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