24 Jun 2009

Unfair contract terms legislation to exclude business contracts, enforcement and remedies expanded


The Trade Practices Amendment (Australian Consumer Law) Bill 2009, which will enact unfair contract terms provisions into Australian Federal law, was introduced into Parliament today.

Significantly, although it had been foreshadowed that the unfair contract term provisions would apply to standard form business contracts, their application will be limited to standard form "consumer contracts" only. The test for a consumer contract will be whether the purpose is wholly or predominantly for personal, domestic or household purposes.

The unfair contract terms provisions will apply to all new standard from consumer contracts entered into after the legislation commences and to any renewal or variation of an existing consumer contract after the legislation commences. The unfair terms provisions are anticipated to commence on 1 January 2010.

Enforcement and remedies

The Bill also includes, for the first time the detail of the proposed amendments foreshadowed by the Government in its discussion paper "An Australian Consumer Law: Fair Markets – Confident Consumers" to enforcement and remedies under the Trade Practices Act 1974.

Readers may recall that these reforms:

  • give the Courts additional powers to impose civil penalties on corporations and individuals for breaches of certain unfair competition and consumer protection provisions of the Act of up to $1.1 million for a corporation and $220,000 depending upon the nature of the offence and to make an order disqualifying a person from managing a corporation, if the person has been "involved in a contravention";
  • allow a Court to make an order against a company in breach of certain unfair competition and consumer protection provisions of the Act to redress the loss or damage suffered by third parties and consumers. A redress order may require, for example, the variation or cancellation of contracts, the refund of money, the repair or provision of party for goods, the resupply of services.
  • allows the ACCC the power to issue a notice requiring a party to provide information and or documents to substantiate claims in relation to the supply of goods and services
  • gives the ACCC the power to issue an infringement notice to companies and individuals within 12 months after an alleged contravention of certain unfair competition and consumer protection provisions imposing a fine of up to $6,600 for a company and $1,320 for an individual
  • allows ACCC to issue a public warning notice if the Commission has reasonable grounds to suspect that certain conduct may contravene certain provisions of the unfair competition and consumer protection provisions of the Act or if a person refuses or fails to comply with a substantiation notice.

The potential impact of these reforms for companies who do not hold substantiation for their claims and/or which might have relied upon the Government having more limited or less effective powers in the past is clear. Given the short time period allowed for substantiation (21 days with a possible extension), companies may find it timely to revisit their compliance procedures.

These provisions will commence on the day after Royal Assent is given (which is not yet known).

We will be updating our detailed paper on this proposed legislation shortly.

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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.