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Top tips for avoiding unfair contract terms

Top tips for avoiding unfair contract terms

By Rosannah Healy

Consumer Law 

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What is the unfair contract terms regime?

In November 2016, the unfair contract terms regime which applied to standard form contracts with consumers was extended to standard form contracts with small business.

Under the regime, a term will be unfair and void if it:

  • causes a significant imbalance in the parties' rights and obligations
  • is not reasonably necessary to protect the larger business' legitimate interests
  • would cause the detriment to the small business.

Since the new laws came into force, the ACCC has continued to educate businesses on compliance and take enforcement action, including against JJ Richards and Servcorp. Enforcement of the unfair contract terms regime continues to be a priority for the ACCC.

Top tips for lawyers practising in this area of law

1. When preparing or reviewing standard form contracts, look out for any clause that causes an imbalance in the parties' rights and obligations e.g. unilateral variation and termination rights, wide indemnities, early termination charges and automatic renewal.

2. Ask the business about the rationale for these terms and whether narrower protections would be sufficient.

3. Consider whether other terms could be introduced to 'balance' the parties' rights and obligations. For example, if one business has the right to unilaterally vary the term, can the term be balanced by introducing a right for the smaller business to terminate if they do not agree with the variation?

4. Consider whether the imbalance could be reduced through notice requirements or requirements for the larger business party to act reasonably.

5. Ensure the term and the contract as a whole are transparent i.e. in plain English, in a reasonable size font and easy to read.

6. Ensure that your customers know who to contact if they have any concerns about the contract and that you have appropriate complaints handling processes in place.

What can attendees expect to learn by attending the Avoiding Unfair Contract Terms session at the LIV's Consumer Law Intensive?

The Avoiding Unfair Contract Terms session, Friday 23 March, will look at the unfair contract terms regime in more detail and the terms which the ACCC has focused on to date. Attendees will also be given practical examples of clauses which may raise issues, and amendments which can address the compliance risk. Register now to receive a 15% discount!  

 

Rosannah Healy, partner, Allens


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