Unfair contracts under the microscope as new laws come into effect

WAFIC is fortunate to receive some free updates from time to time from legal firms, advising of legislative changes which may potentially have impact on fishing businesses.  Obviously without legal qualifications WAFIC can’t comment on the veracity of the information provided, but is happy to share on the basis that the materials provided are not relied upon and professional legal advice should be sought for clarification.

The unfair contract regime is getting tougher as on 9 February 2022 the Treasury Laws Amendment (Enhancing Tax Integrity and Supporting Business Investment) Bill 2022 was introduced to Federal Parliament. This Bill seeks to strengthen provisions which protect consumers and small businesses from unfair contract terms (UCTs) in standard form contracts.

Fremantle lawyers, Warren Syminton Ralph, have recently advised of the outcomes of a legal case which highlights the risks of and what constitutes an unfair contract term and it appears that the defendants in the forementioned case would have been much worse off if the case was brought after the changes had been implemented.

What are the changes?

  • Small business coverage: the meaning of small business will be extended to include businesses with less than 100 employees (rather than 20), or a business whose annual turnover does not exceed $10 million.
  • Insurance contracts: general insurance contracts entered after 4 April 2021 will also be included. The fairness of an insurance contract can be challenged by the customer/insured or a third-party beneficiary to the policy.
  • Contract price: the changes will remove the threshold contract price that determines whether the regime will apply to a contract. This means that contracts of any value will be caught.
  • Penalties: the use of unfair terms will be considered unlawful and not just unenforceable. This means that civil penalties will apply if a contravention occurs. The maximum penalty for a corporation is $10 million, 3 times the benefit of the contract; or 10% of the annual turnover of the corporation. The maximum penalty for individuals is $500,000. Important to note here is that there can be more than one contravention in the same contract – and multiple penalties!
  • Other remedies: apart from civil penalties, courts will also be able to make orders for damages, orders to voidvary or refuse all or part of the contract, or an injunction to stop future entry into a contract with the same or similar terms.
  • Rebuttable presumptions: the changes will introduce a new rebuttable presumption which will become problematic for businesses that has standard form contracts. The presumption will have the effect of deeming a term to be unfair if it is the same as or substantially similar to a term already determined by a court to be unfair by the same offender or one in the same industry. This presumption can be rebutted.

The advice from the lawyers was to avoid risks and look to fix shortcomings in your contracts, in particular:

  • Avoid any Breach of s24 of the ACL
  • Avoid the following in consumer contracts or small business contracts:
    • disproportionate consequences and remedies
    • uncertain outcomes and indeterminate liability
    • unilateral increases without rights for the other party to get out of contract
    • automatic renewals
    • unreasonable terms having regard to the type of consumer or small business
    • contradictory terms

Rather than solely relying on the information provided above, any fishing businesses which have any potential concerns should seek some formal clarity from a legal professional regarding their specific circumstances and contracts.