Any business in the retail industry, including manufacturers, wholesalers and retailers, that enters into standard form consumer and small business contracts with customers in Australia is on notice to ensure that by 9 November 2023, their standard form contracts are in compliance with the requirements of the new unfair contract terms regime in Australia (which forms part of the Australian Consumer Law (ACL)) (UCT Regime). As of 10 November 2023, significant pecuniary penalties will apply in relation to the use of unfair contract terms in standard form contracts entered into with Australian customers.
Class of Contracts Covered
The UCT Regime regulates standard form contracts for goods or services that are supplied under ‘consumers contracts’ or “small business contracts”.
A ‘standard form contract’ is generally considered to be one that is offered on a ‘take-it or leave-it basis’, without there being a genuine opportunity for the counterparty to negotiate the terms of the contract. The related terms of ‘consumer contract’ and ‘small business contract’ are defined in the UCT Regime and are important on the basis that they indicate the class of contracts currently covered by the UCT Regime:
As discussed in more detail below, the class of contracts covered by the UCT Regime is set to be considerably expanded once the key changes outlined below come into effect.
Determining Whether a Term is Unfair
Under the UCT Regime, a term of a standard form consumer or small business contract is considered to be unfair if it:
Importantly, each of these three elements must be satisfied in order for the relevant term to constitute an unfair contract term for the purposes of the UCT Regime. Whilst the ACL provides examples of terms that may be considered to be unfair contract terms (e.g. unilateral variation, renewal or termination rights), each term needs to be assessed against the 3-limb test outlined above on a case-by-case basis. Many of these example terms are commonplace in customer contracts used across the retail industry in Australia and will therefore need to be carefully reviewed for compliance purposes before the changes come into effect.
The key changes coming into effect on 10 November 2023 include the following:
The broadening of the class of contracts covered by the UCT Regime is particularly important for both wholesalers and retailers that deal with small businesses in connection their day-to-day activities in Australia. The terms of any such contracts are now likely to fall within the ambit of the UCT Regime and will need to be carefully reviewed for compliance with the UCT Regime before the changes outlined above come into effect.
Importantly, the Chair of the Australian Competition and Consumer Commission (ACCC), Gina Cass-Gottlieb recently confirmed that compliance with the new UCT Regime will be an enforcement priority for the ACCC in 2023/2024.
In a speech to the Committee for Economic Development of Australia (CEDA) on 7 March 2023, Ms Cass-Gottlieb noted that:
‘In anticipation of the new provisions, [the ACCC is] undertaking a review of business terms and conditions across a number of different sectors. This proactive review will be used as the basis for future enforcement cases.’
This indicates that the ACCC will be proactively reviewing standard form contracts in a number of sectors throughout 2023 and 2024 and taking enforcement action against those businesses which it considers to be in contravention of the UCT Regime. This could include businesses operating in the retail and consumer sector in Australia.
These changes take effect on 10 November 2023. Any individuals or entities in the retail industry that use standard form consumer or small business contracts with their Australian customers will need to have those contracts carefully reviewed before the prohibition, and the monetary penalties outlined above, relating to the use of unfair contract terms apply. Clients should also be mindful that the changes to the UCT Regime apply to new contracts entered into after this date, as well as contracts that are varied or renewed after this date.
Oct 03 2023
Oct 02 2023