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Unfair Contract Terms Changes in Australia: What You Need to Know
If you`re a business owner in Australia, it`s important to stay informed about changes in legislation that could impact your operations. One such change is the revised unfair contract terms (UCT) legislation that came into effect on November 12, 2016. This update has significant implications for businesses that use standard form contracts in their transactions with other businesses or consumers.
What are Unfair Contract Terms?
Unfair contract terms are provisions in standard form agreements that are deemed to be one-sided and disadvantageous to the non-drafting party. Such terms can include clauses that limit or exclude warranties, liability and indemnification, or that allow one party to unilaterally change the terms or terminate the agreement without notice or compensation.
The Australian Competition and Consumer Commission (ACCC) identifies unfair contract terms as those that would cause a significant imbalance between the parties` respective rights and obligations under the contract, are not necessary to protect the drafter`s legitimate interests, or would cause detriment to the other party if enforced.
Why the Changes?
The UCT legislation was first introduced in 2010 to protect consumers from being exploited by large corporations that used unfair terms in their standard form contracts. However, the scope of the law was limited to individual consumers and did not cover small businesses.
The recent changes to the UCT legislation extend its coverage to contracts between businesses where at least one of the parties employs less than 20 people and the contract value is below a certain threshold ($300,000 for contracts 12 months). This means that small and medium-sized enterprises (SMEs) are now better equipped to challenge unfair contract terms in their dealings with larger companies.
What are the Implications for Businesses?
The revised UCT legislation has significant implications for businesses that use standard form contracts in their transactions with other businesses or consumers. Companies that fail to comply with the new rules risk being fined up to $1.1 million per breach.
To avoid falling foul of the UCT legislation, businesses should:
– Review their standard form contracts to identify any potentially unfair terms and modify or remove them.
– Be transparent about their contractual terms and avoid using opaque language or legalese that could obscure key provisions.
– Ensure that any variations or amendments to the contract are communicated in writing and agreed to by both parties.
– Train their staff on the UCT legislation and establish procedures for handling complaints and disputes related to unfair contract terms.
The revised UCT legislation is an important step towards fairer and more equitable business practices in Australia. SMEs now have greater protection against unfair contract terms when dealing with larger companies, and businesses must take care to ensure that their standard form contracts are compliant with the new rules. By doing so, they can safeguard their reputation and avoid costly legal disputes.