What you need to know about the new Unfair Contract Terms
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From 9 November 2023, the new Unfair Contract Terms (“UCT”) regime would apply to “small business” and “consumer” contracts.
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To comply with the new UCT regime, MTA online shop is now selling the updated version of both the New and Used vehicle sales contracts, which contain the following changes:
1)
Adjusting existing clauses to avoid from being labelled as unfair under both new and old laws on Unfair Contracts Terms,
2)
Consolidating all the clauses on termination under one heading,
3)
Inserting a new limitation of liability clause to comply with the Australian Consumer Law (“ACL”),
4)
Extending the right to terminate under a force majeure event,
5)
Inserting a disclaimer to exclude liability for interstate compliance,
6)
Insertion of new boilerplate clauses, and
7)
Updating references to superseded legislations,
8)
Compliance with the disclosure requirements under both the privacy legislation and NSW Fair Trading legislation.
In essence, the purpose for updating our standard contracts (for both the new and used vehicle sales) is to comply with:
1)
General contract law,
2)
Consumer guarantee requirements under the ACL,
3)
Unfair contract terms prohibitions under the ACL,
4)
Disclosure of unfair terms under the NSW Fair Trading legislation, and
5)
Disclosure of use of personal information Privacy Act.
As Members may be aware, the new UCT regime applies to a standard contract (where one of the parties is either a “small business” or “consumer”) that is signed, renewed, varied, or extended on or after 9 November 2023.
If you have used our earlier version of standard contracts to enter into an agreement before 9 November 2023, such agreement is still valid but will instead be subject to the earlier law on UCT.
To assist Members in their contract management, MTA NSW has included the following Table of Comparison between the earlier and new law on UCT.
| Earlier UCT Law |
New UCT Law |
Commencement
Applies to standard form contracts that are signed, renewed, varied or extended within the period from 1 July 2010 to 8 November 2023.
|
Commencement
Applies to standard form contracts that are signed, renewed, varied or extended on or after 9 November 2023.
|
Types of standard form contract
Subject to some exceptions, the meaning of “standard form contract”:
1) was restricted to consumer contract only (i.e. a contract where one of the parties is a consumer) from 1 July 2010,
2) was extended to include small business contracts from 12 November 2016 and
3) was further extended to include insurance contracts from 5 April 2021.
|
Types of standard form contract
Subject to some exceptions, the meaning of “standard form contract” will on 9 November 2023 apply to:
• consumer contracts,
• small business contracts, and
• insurance contracts.
|
Definition of “Small Business”
The UCT regime applies to a small business contract if:
• one party to the contract is a business that employs less than 20 people; AND
• the contract has a duration of less than 12 months, in which the upfront price payable under the contract must not exceed $300,000, or the contract has a duration of more than 12 months, in which case it must not exceed $1 million.
|
Definition of “Small Business”
The UCT regime will apply to a small-business contract if one party to the contract is a business that:
• employs less than 100 people; or
• has a turnover for the last income year of less than $10 million.
The monetary contract threshold has been removed. Under the Australian Consumer Law and ASIC Act, part-time employees are to be counted as an appropriate fraction of a full-time equivalent employee.
|
Civil penalties
No equivalent.
|
Civil penalties
A civil penalty may be imposed by the courts if a person proposes, applies, relies upon or purports to apply or rely upon, a UCT.
For companies, the penalty will increase to the greater of:
• $50 million (formerly $10 million during the initial proposal);
• three times the value of the benefit to the company if able to be determined; or
• 30% of the corporation's turnover during the offence period (formerly 10% of the annual turnover only in the 12 months prior to the breach during the initial proposal).
For individuals, the penalty is:
• $2.5 million (formerly $500,000 during the initial proposal).
|
Court powers
The court currently has the following powers:
• Automatically void an unfair term in a standard-form contract.
• On application by an affected party, or the ACCC on behalf of a party or a non-party, void a whole or part of a contract or collateral arrangement.
• Provide injunctive relief to restrain a party from applying, relying upon, or purporting to apply or rely upon, an unfair term of a contract.
|
Court powers
The court will soon have the following powers:
• Void, vary or refuse to enforce an unfair contract if such an order is appropriate to prevent loss or damage.
• On application by the ACCC, prevent a term that is the same or substantially similar in effect to a term that has been declared as unfair, from being included in any future standard-form small business or consumer contract.
• Provide injunctive relief to restrain a party from applying, relying upon, or purporting to apply or rely upon, an unfair term of a contract.
|
Determining whether a contract is a standard form contract
There are several factors the court must consider in determining whether a contract is a standard form contract.
One consideration is whether a party was required to:
• reject or accept the terms of a contract in the presented form, and
• whether another party was given an effective opportunity to negotiate the terms of the contract.
|
Determining whether a contract is a standard form contract
In addition to the current factors, a court must also consider whether one of the parties to a contract has used the same or a similar contract before.
A court may determine a contract to be a standard-form contract despite there being an opportunity for:
• a party to negotiate alterations to contract terms that are minor or insubstantial in effect,
• a party to select a term from a range of options determined by another party, or
• a party to another contract or proposed contract to negotiate the terms of the other contract or proposed contract.
|
WHAT SHOULD MEMBERS DO
1.
The updated version of both the New and Used vehicle sales contracts are now available for Members to purchase from the
MTA online shop. We recommend that Members use our updated vehicle sales contracts (instead of our earlier ones) for any agreement to be signed, renewed, varied, or extended on or after 9 November 2023. Unfortunately, MTA NSW will not be providing electronic soft copy versions of the vehicle sales contracts to members at this juncture. Only the carbonated hard copy print of the sales contracts are available for purchase.
2.
In addition, MTA NSW also offers new legal services (at a fraction of what law firms would normally charge) to assist in undertaking drafting and review of all other standard form contracts signed by Members to ensure compliance with both the earlier and new UCT regime.
For further query, contact Steven Tan, Legal Counsel on Tel: 02 9016 9000.
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