We have written before about the Unfair contract term (UCT) regime introduced in 2016 which means that certain terms in ‘standard form’ contracts large corporates are void. Since 2016, it has become evident many large companies have UCTs in their contracts (including UberEats, Visy Paper and JJ Richards), and while they have amended their contracts to remove the unfair term(s), they face no pecuniary penalty for the breach.
Common unfair contract terms include:
- rights for the contract provider to unilaterally vary contract terms
- broad and unreasonable powers to protect a party against loss or damage at the expense of the small business
- unreasonable ability to cancel or end an agreement. Under the current regime, a small business (or the ACCC on its behalf) may only seek to have a particular term void by a court or tribunal.
The Government plans to amend the law to make UCTs illegal, thereby introducing appropriate financial penalties which will:
- allow the ACCC to seek financial penalties and issue infringement notices when a business is found to have imposed UCTs
- provide an effective deterrent for large corporates who are knowingly including UCTs in their contracts
- provide an incentive for large corporates to proactively review and amend current contracts, rather than sitting on their hands until they are forced to do so after a term is found unfair by a court or tribunal
- where a UCT is found illegal, provide precedents for other contracts which will inevitably have the flow-on effect of reducing UCTs
- improve the confidence of small businesses to do business with large corporates
- provide greater incentive for small businesses to bring claims against large corporates who are using UCTs to their advantage.