Changes to the unfair contract term regime are now in place, what next?

This isn’t another article or alert that details the changes to the unfair contract term regime (if you aren’t aware, please see here: Change is coming to the Australian Competition and Consumer Law: civil penalties to increase and be introduced for unfair contract terms – Cornwalls), it’s to help you with the ‘what do I do now’ phase.

What can you do?

1. Review your own general standard form contract terms (ie the take it or leave it kind of contracts that your business may rely on) and consider whether all the terms are ‘fair’. We recommend taking the following into consideration when doing so:
   1. Does it cause a significant imbalance in the parties’ rights and obligations under the contract?;
   2. Is it reasonably necessary to protect the legitimate interests of the party (your business) who would be advantaged by the term;
   3. Could it cause detriment (financial or otherwise) to the disadvantaged party, if the contract term were applied or relied on by your business?
   4. How transparent is the contract and its terms (ie legibility, accessibility etc)?
2. Review your Australian Consumer Law (ACL) compliance program to determine whether you have a system in place that adequately deals with standard form contract management and reviewing of such contracts.

What can we do for you?

1. Review your terms and conditions for $1000 + GST and flag items that could potentially be unfair.^[1]
2. Prepare an ACL compliance plan.
3. Provide an initial ACL compliance ‘health check’ of your business.
4. Prepare a customer complaints handling policy.
5. Prepare a whistleblowing policy.
6. Develop an initial framework for a disaster recovery plan – when the ACL balloon goes up!
7. Education sessions for all personnel, including senior management.

Why should you do this?

• Avoid hefty penalties for corporations (maximum penalty per contravention is $50 million;^[2]
• Create and maintain a culture of compliance with the ACL;
• Materially reduce the pecuniary penalties that the enterprise will suffer, should it be determined by the court that it has contravened the ACL; and
• Protect the business’ goodwill.

Queries

If you have any questions about what you should do next or to begin a review of your contract terms, please get in touch with an author or any member of our Corporate team.

Disclaimer

This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.

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[1] This review is simply to flag the items that could be unfair, it does not include specific advice or drafting. If you would like a comprehensive review or for us to re-draft your terms and conditions, we will provide you with a cost estimate.

[2] or the three times the value of the benefit obtained; and if the court cannot determine the value of the benefit obtained, 30% of the company’s (and related bodies corporate’s) ‘adjusted turnover’ during the ‘breach’ period.