You may need to look at the contracts you use in your business because, come 9 November, the Australian Competition and Consumer Commission (ACCC) will prohibit businesses from using unfair contract terms.
According to the new regulations, courts will have the authority to impose significant penalties on businesses using contracts that include unfair terms.
These changes prohibit businesses from proposing, using or depending on unfair terms in contracts with consumers and small businesses. Standard form contracts are common in many businesses. The ACCC says it hopes these changes will provide greater protection for consumers and small businesses who previously didn’t have the power or negotiating ability to prevent businesses from using a ‘take it or leave it’ standard form contract.
Penalties for businesses could reach $50 million, three times the value of benefit obtained from the contract or 30% of turnover. Individuals could face penalties up to $2.5 million.
The changes will also expand unfair contract terms to apply to more small businesses than before. The threshold for small businesses will increase to apply to businesses that employ fewer than 100 people or have an annual turnover of less than $10 million.
When drawing up your contracts, you should:
- Consider the language from both sides
- Include counter-balancing terms
- Avoid broad terms
- Use clear and transparent language
- Meet legal obligations under the Australian Consumer Law
The new regulations will apply to new contracts drawn up and contract renewals taking place after 9 November 2023.
Adam Zuchowski is a disputes lawyer and principal at Sutton Laurence King Lawyers.
Need help with a contract dispute? Contact Sutton Laurence King Lawyers today on 03 9070 9810 or email info@slklawyers.com.au.