Late last year, the Australian Parliament passed a series of changes relating to the operation of Unfair Contract Laws in Australia. The Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (legislation.gov.au) was approved by the Governor General on 9 November 2022 and provided for an adjustment period by Australian business prior to coming into effect 12 months later. That is, 9 November 2023 so the new laws apply now.
Australia’s original Unfair Contract Terms (UCT) Laws were first introduced in 2010 to protect Australian consumers from damage arising from the inclusion of unreasonable terms in contracts. The UCT Laws were subsequently expanded to include small business in 2016.
The 2016 UCT Laws, however, were widely criticised due to the use of a limited definition of what constitutes a ‘small business’ and the application of relatively modest contract value thresholds used to exclude consideration of higher value contracts.
The narrow definition of ‘small business’ resulted in a reality where that particular iteration of the previous laws had limited application to contracts used in the Australian fuel industry, particularly in respect of B2B contracts used for the supply of fuel and/or convenience products.
These latest changes to Australia’s UCT Laws, however, are significant. The changes appear to have made the UCT Laws materially relevant to many of the B2B contracts that are used in the Australian fuel industry.
The key changes can be summarised as follows:
- New definition of a ‘Small Business’:
The new UCT Laws have expanded the definition of a ‘small business’ to include businesses with up to 100 employees (up from 20 employees) AND/OR up to $10M in annual turnover (up from $300,00 for contracts less than 12 months and $1M for contracts more than 12 months).
- Higher Maximum Penalties:
The maximum penalty for a breach of the UCT Laws by companies has been substantially increased and is now defined as the greater of:
– $50 million, or
– Three times the value of the benefit obtained, or
– 30% of the Company’s ‘adjusted turnover; during the breach period of the offence if the court cannot determine the value of the benefit obtained.
- Revised definition of a “Standard Form” Contract:
The new UCT Laws have specified that a ‘standard form contract’ will be deemed to be such regardless of whether there is an opportunity for:
– a party to negotiate minor or unsubstantial changes, or
– a party to select a contract term from a range of given terms, or
– the parties to meaningfully negotiate the terms of an alternate contract but not meaningfully negotiate the terms of the contract in question.
The new laws do not provide for retrospectivity and will therefore only apply to new contracts and contract renewals struck on or after 9 November 2023.
“Our understanding of the UCT Law changes that took effect on 9 November 2023, is that the changes in definitions and contract thresholds mean that these laws will be significantly more relevant in the context of B2B contracts used in the Australian Fuel Industry in the future”, said ACAPMA CEO Mark McKenzie.
“We therefore urge all ACAPMA members to familiarise themselves with the changes UCT Laws to ensure that they are not entering into contracts in the future that are likely to breach these new requirements and open the business to penalties”, concluded Mark.
“The advice now is that if you are unsure about whether the terms of the contract you are about to enter breaches these new laws then seek formal legal advice before executing the contract”, concluded Mark.