9 Important Updates Coming November 2023
As we approach November 2023, it’s essential to get a handle on the significant changes being introduced to the ‘National Unfair Contract Terms Regime’. In this article we aim to simplify the nine key changes being made to the regime and highlight the precise implications these alterations may have on your business operations.
The National Unfair Contract Terms Regime, introduced in 2010 and expanded in 2015, is getting its first overhaul in 8 years. Managed by the ACCC, this regime aims to protect consumers and small businesses. From 09 November 2023, any contract entered into, renewed, or altered will be impacted by these changes.
Introduction of Financial Penalties:
New: Fines can now be imposed if someone uses an unfair contract term.
Previously: No penalties existed for this.
Definition of Standard Form Contracts:
New: A contract can still be considered ‘standard’ even with minor negotiations or options provided by one party.
Previously: A key factor was if there was genuine negotiation about the contract terms.
Definition of ‘Small Business’ Contracts:
New: Protections under both the ACL and ASIC Act will apply if one party employs fewer than 100 persons and/or has an annual turnover of less than $10,000,000.
Previously: The limit was set for businesses employing fewer than 20 persons and certain monetary thresholds.
Consideration of Repeated Use:
New: The court will also consider if one party has used a similar contract in the past.
Previously: Only certain factors were considered.
Non-Party Clarification:
New: The law clarifies that both consumers and small businesses are covered.
Previously: Only referred to “non-party consumers”.
Court Powers:
New: The court has expanded powers to make orders regarding contracts, even if no actual loss or damage is shown. This includes stopping the use of unfair terms.
Previously: Terms found unfair were automatically void, with the court having limited powers.
Injunctive Powers:
New: The court can now stop a person from entering into a contract with an unfair term or relying on such a term in an existing contract.
Previously: Only restraining orders were allowed against unfair terms.
Exemptions for Clauses by Law:
New: Some clauses mandated by Commonwealth, state, or territory laws are exempt.
Previously: Only clauses required or permitted by law were exempt.
Exclusions from the UFC Regime:
New: Some contracts, like operating rules of licensed financial markets or certain insurance contracts, are excluded.
Previously: There was no equivalent.
Introduction of Financial Penalties:
The government is introducing serious penalties, but they also expect regulators to enforce these changes reasonably. Potential penalties include AUD$2,500,000 for individuals and up to AUD$50,000,000 or more for corporations, depending on circumstances.
Who Should Be Concerned?
If you use standard contracts in your business transactions with consumers or other small businesses, it’s vital to ensure your contracts are up to date with these changes. In particular contracts that contain auto-renewal clauses without notice, late payment fees and termination clauses should be reviewed.
How Can Optimum Recoveries Assist?
At Optimum Recoveries, our mission is debt prevention. We believe that prevention is always better than cure. By having a robust contract in place, debt recovery becomes a smoother process. Our focus is to support you in understanding these changes, ensuring your contracts remain strong and compliant. Reach out today to organise a review of your current terms and conditions or trade contracts – call 1300 556 937.
