Reminderfy: Terms and Condition

The unfair contract terms regime applies to standard form consumer contract or small business contracts. In the context of the attached terms, we are focussed on the application to small business contracts.

A small business contract is defined in s23(4) of the ACL to mean a contract if:

1. the contract is for the supply of goods or services (or a sale or grant of an interest in land); and
2. at the time the contract is entered into, at least one party to the contract is:

(i)  a business that employs fewer than 100 persons; or

(ii)         a business with an annual turnover of less than $10 million.

A term of a standard form small business contract will be "unfair" if it:

(a)  would cause a significant imbalance in the parties' rights and obligations arising under the contract; and

(b)  is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and

(c)  would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

The maximum financial penalties for businesses in breach of the UCT regime are the greater of:

(a)  $50,000,000;

(b)  three times the value of the "reasonably attributable" benefit obtained from the conduct, if the court can determine this; or

(c)  if a court cannot determine the benefit, 30% of adjusted turnover during the breach period.

Each offence attracts a separate penalty. In this context, each unfair contract term constitutes a separate offence, each time it is used in an affected contract.  Multiple affected contracts which each contain multiple 'unfair' terms can thus significantly increase the potential maximum financial penalties.

In considering whether a term of a contract is unfair, a court may take into account such matters as it considers relevant, but must take into account the extent to which a term is transparent (eg, clearly presented and expressed) and the contract as a whole.

Examples of terms that may be unfair include:

(a)  terms that permit one party (but not another party) to avoid or limit the performance of the contract;

(b)  terms that permit one party (but not another party) to terminate the contract;

(c)  terms that penalise one party (but not another party) for a breach or termination of the contract;

(d)  terms that permit one party (but not another party) to vary the terms of the contract;

(e)  terms that permit one party (but not another party) to renew or not renew the contract; and

(f)   terms that permit one party to unilaterally vary the terms of the contract or the characteristics of the goods or services provided under the contract.