In a statement, Assistant Treasurer Michael Sukkar announced that the federal government agreed with the states and territories to strengthen existing unfair contract term protections in the Australian Consumer Law by:
- Making unfair terms unlawful and giving courts the power to impose a civil penalty;
- Expanding the definition of small business and removing the requirement for a contract to be below a certain threshold; and
- Improving clarity on when the protections apply, including on what is a “standard form contract”.
“These reforms will improve consumer and small business confidence when entering into contracts,” Mr Sukkar said.
The Treasury is expected to develop exposure draft legislation to provide a further opportunity for stakeholders to comment on the detail of the reforms.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell has welcomed the national agreement, saying the reforms will ensure unfair contract terms are illegal and the courts will have the power to levy penalties for breaches.
“Equally, we welcome the expansion of the definition of small business to under $10 million turnover or up to 100 employees, which means 99 per cent of businesses will be afforded these protections,” Ms Carnell said.
“The removal of the requirement for a contract to be below a certain threshold also represents significant progress for small businesses.”
Further, Ms Carnell said it is crucial the reforms apply to government contracts, which often impose unfair contract terms on small businesses.
However, Ms Carnell said that while the reforms offer small businesses more confidence to enter into a contract with a larger business, it is disappointing that unfair contract terms will still need to be decided by the courts.
“This has proven to be a significant barrier for small business as pursuing legal action is a costly, stressful and time-consuming exercise,” she said.
“That’s why my office continues to recommend giving the regulators additional powers to penalise businesses found to have imposed unfair contract terms on a small business.”