23rd August, 2021 · bulletin

Strengthening Unfair Contract Term

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The Assistant Treasurer, Michael Sukkar MP, today released an Exposure Draft Bill to strengthen the Unfair Contract Term (UCT) protections for consumers and small businesses. The revised UCT protections are designed to protect small businesses from unfair terms in standard form contracts.

Businesses with less than 100 employees or with an annual turnover of less than $10 million, will be eligible under the new protections. The new law also aims to provide additional clarity about what constitutes a standard form contract and provide courts with additional powers to penalise those who seek to use unfair terms in their standard form contacts.

As agreed by the Commonwealth state and territory consumer affairs ministers late last year, the new law will include reforms which:

  • make UCTs unlawful and give courts the power to impose a civil penalty;
  • provide more flexible remedies to a court when it declares a contract term unfair by:
    • giving courts the power to determine an appropriate remedy, rather than the term being automatically void;
    • clarifying that the remedies available for ‘non-party consumers’ also apply to ‘non-party small businesses’; and
    • creating a rebuttable presumption provision for UCTs used in similar circumstances;
  • increase the eligibility threshold for the protections from less than 20 employees to less than 100 employees, and introduce an annual turnover threshold of less than $10 million as an alternative threshold for determining eligibility;
  • remove the requirement for the upfront price payable under a contract to be below a certain threshold in order for the contract to be covered by the UCT protections;
  • improve clarity around the definition of standard-form contract, by providing further certainty on factors such as repeat usage of a contract template, and whether the small business had an effective opportunity to negotiate the contract; and
  • enable certain clauses that include ‘minimum standards’ or other industry-specific requirements contained in relevant Commonwealth, state or territory legislation to be exempt from the protections.

The AADA welcomes the changes which, if introduced as drafted, will provide increased protections for Dealers who qualify under the new thresholds and we commend Assistant Treasurer Michael Sukkar for his support of these reforms.

Taken into account with the new automotive Dealer Schedule in the Franchising Code and Dealer specific protections that exist in NSW as part of the Motor Dealers and Repairers Act, the UCT changes add to the legislative body of work which recognise and seek to correct the differences in power that exists between Dealers and OEMs.

The AADA would however still argue that all franchisees should qualify for the UCT protections, as noted in Recommendation 6.8 of the Parliamentary Enquiry into the Franchising Code and will be responding to the Government accordingly.

The draft Bill is open for consultation until 20 September 2021 and more detailed information about the changes is available on the Treasury website.