Do you need to review your standard form contracts for unfair terms?

Unfair Contract Terms regime

The Unfair Contract Terms regime in the Competition and Consumer Act applies to “standard form contracts” which are either “consumer contracts” or “small business contracts”.  If a court or tribunal finds that a term in these types of contracts is ‘unfair’, the term will be void (i.e. the term will not be legally binding on the parties).  The rest of the contract can continue to bind the parties to the extent it is capable of operating without the unfair term.  For further background on the unfair contract terms generally, you can read our previous article on this topic.

Recent updates

Updates/consultations in relation to the Unfair Contract Terms regime include:

• the extension of the Unfair Contract Terms regime (since April 2021) to certain types of insurance contracts (including common forms of insurance contracts such as car insurance, house and contents insurance, travel insurance and life insurance); and
• the ACCC consultation on enhancing the Unfair Contract Terms regime further to potentially include making unfair contract terms illegal and attaching penalties, strengthening powers of regulators, and changing the threshold for what constitutes a small business.  Draft legislation on the potential updates has yet to be released but you can view the responses submitted in connection with the consultation and further updates via this link: https://consult.treasury.gov.au/consumer-and-corporations-policy-division/enhancements-to-unfair-contract-term-protections/

Fuji Xerox case

We previously wrote (October 2020 Article) about the ACCC’s legal action in the Federal Court against Fuji Xerox Australia, where the ACCC alleged that Fuji Xerox’s template/standard form contracts included contract terms (including automatic renewal terms, excessive exit fees and unilateral prices increase) that were unfair under the Unfair Contract Terms regime in the Competition and Consumer Act.

Fuji Xerox applied for a summary dismissal of the ACCC’s case on the basis that the contracts in question were merely template contracts and the ACCC’s case did not identify or focus on any actual contract between Fuji Xerox and a particular customer.

In March 2021, the Federal Court of Australia rejected Fuji Xerox’s application for summary dismissal.  Although a final decision has not yet been made on whether the terms in Fuji Xerox’s template contracts are actually unfair under the Unfair Contract Terms regime, the activity involving the Fuji Xerox case (as well as the ACCC consultation) is a good reminder to ensure any standard form or template contracts are regularly reviewed to ensure that they do not contain any terms that could be considered to be unfair under Unfair Contract Terms regime.

If you have any questions on unfair contract terms and how they apply to your business please get in touch with one of the Sierra Legal team.