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Changes to unfair contract terms and how this effects the construction industry

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On 10 November 2022, the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) introduced widespread reforms to unfair contract terms (‘UCT’) under the Australian Consumer Law.
What are considered ‘unfair contract terms’?

To be an unfair contract term, the term must:

  • Cause significant imbalance between the parties’ rights and obligations under the contract; 
  • Not be reasonably necessary to protect the legitimate interests of the party advantaged by it; and 
  • Cause financial or other detriment (including delay) to a consumer or small business if relied upon.

There is no set list of terms that the courts may deem as unfair contract terms – any term which fulfils the above criteria will be considered a breach of the UCT regime.

How does this effect the construction industry?
More small businesses will be subject to the UCT regime.
When will a business have access to the UCT regime:
  • Less than 100 employees (including regular casual employees)
  • The contracts that enter into are a standard form provided by the other party 
Implications:
  • Clauses such as liquidated damages, termination for convenience or automatic renewal clauses are void and therefore not binding 
  • Penalties of up to $50 million can be handed down to businesses for breaches of Australian Consumer Law 
Key Take-aways:
  • You may have rights despite what the contract says
  • If you are preparing contracts for another party to sign, consider the implications of the changes to the UCT regime

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