July 17, 2024

Obligate Law

Professional Law Makers

Unfair contract terms regime – key terms to review

9 min read
Unfair contract terms regime – key terms to review

Changes to Australia’s competition and consumer law mean businesses will now face new and increased penalties for breaches of the Australian Consumer Law (ACL) and the unfair contracts terms law. These changes were introduced late last year and will apply from November 2023 onwards.

Expansion of the small business contract threshold

From November 2023, the unfair contract terms regime which encompass contracts where at least one party:

  • made the relevant contract in the course of carrying on a business and at a time when they employed fewer than 100 persons; and/or
  • had a turnover for the party’s last income year ending at or before the time the contract is made, of less than $10 million.

This means the regime will now apply to a much larger pool of contracts than it has in the past.

The contract also must be for the supply of goods or services or sale of land.

Does it apply to government contracts?

Yes. Under section 2A of the Competition and Consumer Act 2010, the unfair contracts regime binds the Crown but only so far as it carries on a business. This means, for example, government tenders or the provision of government services would not be captured.

Some factors relevant to whether a government entity, department or statutory owned corporation is “carrying on a business” include:

  • whether the activity is carried on for profit
  • the purpose of the activity, whether it involves the carrying out of a regulatory or governmental function in the interests of the community
  • whether the government entity is competing with a private sector supplier.

Unfair contract terms to look out for

Key elements in small business contracts that will be deemed unfair include:

  • a term that causes a significant imbalance in the parties’ rights and obligations. This is typically seen in a standard form contract which does not provide for review and negotiation of the terms
  • a term that is not reasonably necessary to protect the legitimate interests of the advantaged party. This is like a penalty type term (for example, paying a large non-refundable deposit)
  • a term that would cause detriment (financial or otherwise) to a party.

Key clauses to review

Contracts should be reviewed with specific attention to:

  • indemnities – for example, is the other party required to provide an indemnity for losses outside of their reasonable control? Is the indemnity unilateral? Does it apply to a broad or unclear range of loss?
  • limitation of liability – is the clause unilateral? Does it limit liability arising out of risks that would be outside of the disadvantaged party’s control?
  • termination – does the agreement provide for a unilateral right to terminate the contract? Does it include extensive termination fees? If so, this clause could be deemed unfair
  • automatic renewal – does the agreement provide for a renewal without notice?

An agreement containing the above examples could be deemed an unfair contract.

Consideration of ‘standard form’ contracts

The reforms will apply to standard form contracts entered, renewed or varied from 9 November 2023. When determining whether a contract is a standard form contract, the court will now be required to consider whether one of the parties has made another contract in the same or substantially similar terms and, if so, the number of contracts that party has made.

Key takeaways

All contracts for the supply of goods or services or sale of land should be reviewed in light of the new reforms commencing in November 2023. In particular, agreements should be reviewed with consideration of:

  • the amount of employees within a contracting company (i.e. do they employ more than 100 people? Would it still be captured by the reforms?)
  • whether the terms are fair in the context of the contract/transaction as a whole
  • the extent to which the terms are transparent
  • whether the terms are expressed in reasonably plain language and presented clearly
  • whether the parties fairly negotiate the terms (i.e. the contract is not offered as ‘take it or leave it’).

For more information on how the regime will impact construction contracts, read our previous bulletin here. 

If you have any questions about the reform or your contracts, please get in touch with a member of our government team in the Key Contacts section.

In the media

NSW teachers offered highest wage increase since 1990s
NSW teachers will become the best paid in the country, under a proposed pay deal offered by the state government. The deal will see an increase of almost $10,000 for first-year teachers and raise the maximum salary by almost $9,000 to around $122,100 (5 September 2023). Read more here.

NSW government to work with Origin Energy to extend the life of Australia’s largest coal-power plant
Despite Origin Energy decelerating in February 2022 that it planned to close Eraring power plant in August 2025, the Minns government has entered negotiations with the owner to temporarily extend its operating life (5 September 2023). Read more here.

Powerhouse museum set to get a more “modest” rebuild than planned under the former state Coalition government
New South Wales Arts Minister John Graham has rejected suggestions they have broken an election promise over plans for the Powerhouse Museum in Sydney. The $500 million allocated to rebuild the Powerhouse Museum has been cut in half with the $250 million to be used to give the museum a “heritage revitalisation” instead of knocking it down. The remainder will go towards building schools and hospitals (2 September 2023). Read more here.

NSW Planning Minister told ‘zero’ chance of addressing housing crisis, urged to adopt AI technology
NSW Planning Minister, Paul Scully, has been told he has “zero per cent” chance of meeting supply to tackle NSW’s housing crisis unless the Government and sector immediately adopt AI technology. Mr Steve Cassells, an engineering lead for engineering technology firm Neuron, states existing AI technology is already available to address risk mitigation, design generation and rendering, needed to provide “early feedback on proposed developments” and avoid wasted time and money (3 September 2023). Read more here.

Inquiry deems Transgrid’s HumeLink energy transmission project will remain above ground
The NSW Government is forging ahead with plans to build overhead power lines across the state after the Standing Committee on State Development into the feasibility of undergrounding high-voltage transmission lines determined putting them underground would be too costly, and put the energy grid under pressure (31 August 2023). Read more here.

ICAC cleared of maladministration over investigation into Gladys Berejiklian
The Independent Commission Against Corruption (ICAC) faced criticism over taking almost two years to complete its report into Ms Berejiklian. However, Gail Furness SC, the independent Inspector, said she was satisfied there was no misconduct or maladministration. However, the report stated ICAC must prioritise reducing the time taken to report to parliament (30 August 2023). Read more here.

NSW Premier announces plan to build residential development with 97 homes on former site of Bega TAFE
The NSW Government has announced it will transform a disused TAFE college on the state’s far south coast into 97 dwellings. 24 dwellings will be set aside for social housing, and eight will be assigned as affordable housing (29 August 2023). Read more here.

Local councils divided after government report identifies cost-effective suburbs for new infrastructure
The report from the NSW Productivity Commission published a report on 28 August 2023 that found the costs of infrastructure to support new homes are lowest in the CBD, parts of the Lower North Shore, Eastern Suburbs and Inner West (28 August 2023). Read more here.

Publications

State’s 95,000 teachers on track for historic pay rise
The Minns Labor Government is on track to make the state’s 95,000 public school teachers the best paid in the country which will help tackle the teacher shortage crisis after positive discussions with the teachers’ union. The four-year agreement will see the starting salary for a NSW teacher increase from $75,791 to $85,000 and the salary for top of the scale teachers increase from $113,042 to $122,100 (5 September 2023). Read more here.

NSW Government rescues the Energy Roadmap to deliver the transition to renewables
The NSW Government has released its strategy to secure the reliable supply of clean and affordable renewable energy for NSW. The Government’s response to the Electricity Supply and Reliability Check UP commits to a whole-of-government effort to deliver the energy transition. Read the Electricity Supply and Reliability Check Up and the NSW Government response here. Read the media release here.

Getting accreditation right so teachers can focus on teaching
From November, teachers will only need to declare to the NSW Education Standards Authority that they have completed the required professional development aligned to the Australian Professional Standards for Teachers, rather than principals signing off on teacher’s practice every five years (30 August 2023). Read more here

Practice and courts

AAT Bulletin Issue No. 17/2023
The AAT Bulletin is a fortnightly publication containing information about recently published decisions and appeals against decisions in the AAT’s General, Freedom of Information, National Disability Insurance Scheme, Security, Small Business Taxation, Taxation & Commercial and Veterans’ Appeals Divisions Cases (28 August 2023). Read more here.

Cases

Commissioner of Police, NSW Police Force v Claydon [2023] NSWSC 1041
ADMINISTRATIVE LAW – application for judicial review – decision under review from the Local Court – initial decision by NSWPF issuing immediate licence suspension notice – appeal to Local Court – Local Court imposed a conditional licence suspension – supervisory jurisdiction – parties’ consent to quashing the Local Court decision – public interest in the Court being satisfied that there is error justifying the relief sought and providing reasons for judgment – whether Local Court’s error was an error of law on the face of the record – finding that the immediate licence suspension notice was invalid disposing of the judicial review application – in any case, the Local Court had no jurisdiction to partially suspend the defendant’s licence – that was an error of law on the face of the record and a jurisdictional error.
Fines Act 1996 (NSW) s 66; Road Transport Act 2013 (NSW) ss 27, 54, 61D, 115, 175, 224, 225, 267, 268, 270; Road Transport (Driver Licencing) Regulation 2017; Supreme Court Act 1970 (NSW) s 69; Uniform Civil Procedure Rules 2005 (NSW) rr 36.1, 36.1A.

Azzi v State of New South Wales [2023] NSWSC 1028
ADMINISTRATIVE LAW – termination of employment for failure to follow direction – whether this amounted to “misconduct” – jurisdictional error – whether employee denied procedural fairness – whether decision to terminate employment was delegated to an unauthorised delegate – Carltona principle – whether directions were lawful and reasonable – legal unreasonableness.
Anti-Discrimination Act 1997 (NSW), s 25; Civil Procedure Act 2005 (NSW), Part 6; Crimes Act 1900 (NSW), s 43; Government Sector Employment (General) Rules 2014 (NSW), rr 4, 38, 39, 40, 42; Government Sector Employment Act 2013 (NSW), ss 7, 26, 27, 41, 58, 69; Work Health and Safety Act 2011 (NSW).

EJX v University of Newcastle [2023] NSWCATAD 228
PRIVACY AND PERSONAL INFORMATION – whether use for purpose collected – whether contravention of information privacy principle.
Administrative Decisions Review Act 1997 (NSW), s 58; Civil and Administrative Tribunal Act 2013 (NSW), ss 29, 72; Privacy and Personal Information Protection Act 1998 (NSW), ss 4, 9, 10, 11, 12, 13, 14, 16, 17, 18, 19, 52, 53, 55.

Ferkh v Commissioner of Police, NSW Police Force [2023] NSWCATAD 231
ADMINISTRATIVE LAW – firearms – firearms prohibition order – whether person ‘not fit, in the public interest’.
Civil and Administrative Tribunal Act 2013; Administrative Decisions Review Act 1997; Firearms Act 1996; Weapons Prohibition Act 1998.

Webb v iCare NSW [2023] NSWCATAD 230
ADMINISTRATIVE LAW – Privacy and Personal Information Protection Act 1998 (NSW) – ss 5, 18, 25(b) and 26(2) PPIP Act and s 54 Government Information (Public Access) Act 2009 – ss 25(b) and 26(2) exemptions from compliance with IPP 11 – whether submissions on the ss 25(b) and 26(2) PPIP Act exemptions potentially applying to a GIPA access applicant (another person) are relevant.
Administrative Decisions Review Act 1997 (NSW); Civil and Administrative Tribunal Act 2013 (NSW); Government Information (Public Access) Act 2009 (NSW); Privacy and Personal Information Protection Act 1998 (NSW).

Vok v NSW Land and Housing Commission [2023] NSWCATAP 232
Appeal – social housing – estoppel – error in application of principles of cause of action estoppel and/or issue estoppel – re-hearing – compensation awarded for breach of tenant’s right to quiet enjoyment.
Civil and Administrative Tribunal Act 2013 (NSW), ss 36(1), 36(4), 80(2), 81(1), 81(2); Residential Tenancies Act 2010 (NSW), ss 44(1)(b), 44(5), 50(1), 50(2), 52(3), 55, 63(1), 64, 65, 187(1)(d).

Ireland v Commissioner of Police (NSW) [2023] NSWCATAD 226
ADMINISTRATIVE REVIEW – licensing – firearms – refusal –public interest – mental illness – whether risk to public safety.
Administrative Decisions Review Act 1997 (NSW); Civil and Administrative Tribunal Act 2013 (NSW); Firearms Act 1996 (NSW); Mental Health Act 2007 (NSW).

Legislation

Environmental planning instruments
Environmental Planning and Assessment Amendment (Western Harbour Tunnel and Warringah Freeway Upgrade) Order 2023 (No 498) – published LW 1 September 2023

Bills passed by both Houses
Revenue, Fines and Other Legislation Amendment Bill 2023 – 24 August 2023
Drug Misuse and Trafficking Amendment (Appointed Persons) Bill – 24 August 2023

Bills introduced by Government
Motor Dealers and Repairers Amendment Bill 2023 – introduced LC 24 August 2023
Sydney Olympic Park Authority Amendment (Hill Road Upgrade) Bill 2023 – introduced LC 24 August 2023

Non-Government Bills
Conversion Practices Prohibition Bill 2023 – LA 24 August 2023
Equality Legislation Amendment (LGBTIQA+) Bill 2023 – LA 24 August 2023

Commonwealth

Act compilation
Superannuation Act 1922 05/09/2023 – Act No. 33 of 1922 as amended
Age Discrimination Act 2004 01/09/2023 – Act No. 68 of 2004 as amended
Ombudsman Act 1976 31/08/2023 – Act No. 1081 of 1976 as amended
Carbon Credits (Carbon Farming) Initiative 2011 30/08/2023 – Act No. 101 of 2011 as amended
Crimes Act 1914 29/08/2023 – Act No 1 of 1914 as amended
Native Title Act 1993 29/08/2023 – Act No. 1 of 1993 as amended
Jobs and Skills Australia Act 2022 29/08/2023 – Act No. 5 of 2022 as amended
Acts Interpretation Act 1901 25/08/2023 – Act No. 2 of 1901 as amended
Law Officers Act 1964 24/08/2023 – Act No. 91 of 1964 as amended

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:


Lejla Kamerasevic, Christine Jones (Editor)

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