Enhanced protection for consumers and small businesses against unfair contract terms

On 23 August 2021, in response to a recent consultation process looking at the unfair contract term (UCT) regime, the Government released an exposure draft Bill to strengthen UCT protections for consumers and small businesses. UCTs remain prevalent in standard form contracts and there is uncertainty around the scope of the existing protections.

The exposure draft Bill proposes reforms to the Australian Consumer Law (as set out in Schedule 2 to the Competition and Consumer Act 2010 (Cth)) and the Australian Securities and Investments Commission Act 2001 (Cth) to help reduce the prevalence of UCTs in standard form contracts and improve consumer and small business confidence when entering into standard form contracts. The key areas of reform introduced by the Bill include:

1. strengthening the remedies and enforcement of the UCT regime (e.g. through providing courts with powers to impose financial penalties, issue injunctions or determine other appropriate remedies with respect to contracts);
2. expanding the class of contracts that are covered by the UCT provisions (e.g. through increasing the ‘small business’ definition threshold and removing the contract value threshold); and
3. clarifying and strengthening the UCT provisions (e.g. technical amendments, clarifying definitions and confirming clauses exempt from the UCT provisions).

It will also become easier for those affected by UCTs to obtain redress by the introduction of a rebuttable presumption. The rebuttable presumption will operate so that a contract term is presumed to be unfair if a court has previously found a similar term, used in similar circumstances, to be unfair.

For further detail, please refer to the exposure draft Bill and explanatory memorandum.

Public consultation on the exposure draft legislation and explanatory materials will close on 20 September 2021. In the meantime, if you would like to know more about how these proposed reforms may affect your organisation, please contact us Claudine Salameh and Helen Taylor.