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The unfair contract terms provisions of the national Australian Consumer Law (ACL), which traditionally protect consumers in relation to terms of standard form contracts, have recently been extended to also protect small businesses.
The ACL is the national law covering fair trading and consumer protection. From 12 November 2016, the unfair contract terms (UCT) provisions of the ACL were extended to smaller businesses, whereby certain contractual terms that are deemed to be unfair on that business can be rendered invalid and therefore unenforceable. If you are contracting with an individual or a small business, you should consider if any of your standard-form contracts need updating.
When do contracts fall under the extended UCT provisions?
The extended UCT provisions apply to ‘standard-form contracts’ entered into or renewed on or after 12 November 2016. If a contract was entered into before 12 November 2016, the extended UCT provisions will only apply to terms in the contract that have been changed or edited after 12 November 2016.
What is a standard form contract?
A standard form contract is not defined in the ACL. However, a standard form contract is typically a contract that has been prepared by one party to the contract before any discussion relating to the transaction occurred between the parties (such as a business’s standard terms and conditions).
An indicator that the UCT provisions may be applicable is when the other party to the contract, being an individual or small business, has little or no opportunity to negotiate the terms (i.e. the party that prepared the standard form contract has all or most of the bargaining power relating to the transaction).
The types of contracts covered include contracts that are:
When is a term unfair?
A term is unfair when:
Examples of terms that may be considered unfair include terms that enable one party (but not another) to:
that penalize one party (but not another) for breaching or terminating the contract.
Certain contracts or terms are excluded from the UCT provisions and include:
If a term is found to be unfair
If a term in a standard form contract covered by the UCT provisions is found by the courts or tribunals to be ‘unfair’, the term will be void and not binding upon the parties. However, the rest of the contract will continue to bind the parties to the extent it is capable of operating without the unfair term.
How can mdp help?
If your business uses standard-form contracts or if you are a small business or individual bound by or have been offered standard-form contracts and think that this applies to you, mdp Law can assist with:
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