12 Jun 2009

Further changes to unfair contract terms reform - and Vic reforms now law


Recognising that its draft provisions on unfair contract terms released last month have a very broad application to many standard business-to-business contracts, the Federal Government has announced some important exclusions in response to stakeholder feedback. The legislation on unfair contract terms will not apply to standard form contracts:

  • where the upfront price payable for the services (including financial services), good or land supplied under the contract exceeds $2 million;
  • that are shipping contracts
  • that are the constitutions of companies, managed investment schemes or other kinds of bodies.

While the Government's change is to be welcomed, the proposed legislation will still have a very wide application beyond consumer contracts. Once introduced into Federal Parliament, the legislation will be referred to the Senate Economics Committee, which will give stakeholders a further opportunity to shape the final version of the Bill. We urge you to consider the potential application of the laws to your business and to make a submission. You can learn more about the draft provisions on unfair contract terms in our briefing note (PDF 1.2MB). Victoria's Fair Trading and Other Acts Amendment Act 2009 No. 19 (Vic) is now law, having been assented to on 10 June 2009.

Among other matters, this Act amends the unfair contract terms provisions in Part 2B of the Fair Trading Act and applies them to contracts covered by the UCCC.

It also removes the requirement that an unfair term be contrary to the requirements of good faith and it introduces in new section 32ZC(4) powers for a court or tribunal, having declared a term to be an unfair term, to make an order:

(a) for the payment of a sum of money

(i) by way of damages (including exemplary damages and damages in the nature of interest); or

(ii) by way of restitution;

(b) that the contract is varied in the manner specified in the order and that the variation takes effect from the time specified in the order;

(c) that

(i) money paid by a person under the contract be refunded to that person; or

(ii) property transferred by a person under the contract is returned to that person;

(d) in the nature of an order for specific performance of the contract;

(e) for rescission of the contract;

(f) for rectification of the contract;

(g) that all or any of the provisions in the contract are not to be enforced;

(h) declaring that a debt is, or is not, owing;

(i) that a person do something, including an order that -

(i) the person repair or provide parts for goods provided under the contract to another person; or

(ii) the person supply services required to be supplied under the contract to another person;

(j) an order that a person refrain from doing something.

Those changes come into effect 11 June 2009.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.