16th November, 2020 ยท bulletin

Changes to the Unfair Contract Term
Provisions

2 minutes to read

The Federal Government has been reviewing the Unfair Contract Term (UCT) provisions of the Australian Consumer Law (ACL) since 2018. The most recent consultation received submissions from nearly 80 interested parties, including the AADA, and has led to the state and territory consumer affairs ministers recently agreeing to strengthen the UCT protections in the ACL.

Following on from this, the Treasury has released a Regulation Impact Statement for decision on Enhancements to Unfair Contract Term Protections.

This paper outlines the proposed changes to the UCT provisions including:

  • making Unfair Contract Terms unlawful and giving courts the power to impose a civil penalty;
  • increasing eligibility for the protections by expanding the definition of small business and removing the requirement for a contract to be below a certain threshold;
  • improving clarity on when the protections apply, including on what is a ‘standard form contract’;
  • increasing the eligibility threshold for the protections from ‘less than 20 employees’ to ‘less than 100 employees’;
  • introducing an annual turnover threshold of less than $10 million as an alternative threshold to employee head count for determining eligibility.

The Treasury believe the proposed changes “will help reduce the prevalence of unfair contract terms in standard form contracts, and improve consumer and small business confidence when entering into contracts.”

A key issue for the AADA, highlighted in our submission and ensuing discussions, has been for UCT protections to be available to all franchised Dealers, irrespective of business size. We will continue to push strongly for changes to the eligibility criteria to ensure this occurs, however we welcome the proposed changes which potentially offer some Dealers legislative protection previously unavailable to them.

The AADA will continue to work closely with the Treasury to develop a better understanding of the changes and the details of the revised eligibility criteria and we will provide more information as soon as it is available.

The next step in the process is for the Treasury to develop draft legislation which will be release for stakeholder consultation. No timing for this has been announced.

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