18 December 2020 | Reading time: 2 minutes
What is an unfair contract term?
A term in a ‘standard form contract’ with a consumer or ‘small business’ will be unfair if it:
Examples of unfair contract terms include terms that permit a party to unilaterally terminate or renew the contract or vary the characteristics of the goods or services that are being provided under the contract.
Overview of key changes.
|Topic||Position under current law||Position under Treasury’s preferred proposals for reform|
|Consequences of an unfair contract term||Term is void.||Term is unlawful.|
|Penalties||No penalties apply.||Civil penalties apply.|
|Small business threshold ie those that can rely on unfair contract laws||Business employs fewer than 20 people.||Business employs up to 100 employees, or has an annual turnover of less than $10 million.|
|Maximum upfront payment under contract is $330,000 or $1 million if the contract is for longer than 12 months.||No maximum upfront payment requirement.|
|Meaning of standard form contract||No precise definition, however, law specifies a number of factors it may consider to determine if a contract is standard form.||Meaning clarified by adding ‘repeat usage’ as a factor to be considered by court when determining if a contract is standard form.|
|Presumption of unfairness||Not applicable.||Rebuttable presumption that a term is unfair if it is the same or similar to a term used in the same industry and that has been declared unfair.|
In anticipation of these changes being triggered under the expanded definition of a ‘small business’ contract, you should review your standard terms. The Bespoke team is ready and willing to assist you with reviewing and making any necessary amendments to your standard form contracts.