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Unfair Contract Terms

Standard format contracts, with an imposing "take it or leave it” approach will soon become a thing of the past for small businesses, thanks to the latest amendments to the Unfair Contract Terms Legislation (Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth)).

The amendments expand coverage for small businesses to include businesses that employ fewer than 100 employees (excluding casual employees) and/or where a party’s turnover for the last income year is less than $10 million.

The amendments also expand on what constitutes a ‘standard form contract’ to now include contracts where there has been an opportunity for the parties to negotiate on minor terms. Interestingly, the Courts must now consider the frequency use of the use of contracts with substantially similar terms when determining if a contract is a ‘standard form contract’.

The recent amendments prohibit unfair terms that allow one party to unilaterally vary the terms of the agreement which creates an unfair power imbalance between the parties. For the building and construction industry, examples of these terms can include time bar provisions, liquidated damages, assignment, liabilities, termination, and suspension clauses.

Some grace period has been afforded the amendments to apply to contracts entered into on or after 10 November 2023, contract renewals and terms of a contract that are varied after this date.

Penalties may range from:

· $50,000,000;

· 3 x “reasonably attributable” profit obtained; or

· 30% of adjusted turnover obtained during the period.

In preparation of the changes, companies should ensure they:

· Familiarise themselves with the amendments;

· Know the business entity they are contracting with;

· Review and amend standard form contracts and processes for small business procurement.

Reach out to the team at Vision Infrastructure if your company requires any assistance with preparing your procurement policies to accommodate the new legislative changes to the UCT laws.

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