Understanding the Unfair Contract Terms Law Change (November 2023)
From 9th November 2023, changes to the Australian Consumer Law will come into effect, imposing penalties for unfair contract terms (UCT) and expanding the scope of small businesses protected by the UCT regime.
While the test for whether a contract term is unfair has not changed, the expanded small business definition may have some bearing on Standard Trading Conditions under which transport operators carry other people’s property, as well as any contracts our transport clients may enter into with a principal.
Who now falls under the small business definition?
Small businesses will be covered by the UCT protections for any new or varied standard form contract from 9th November 2023, if they:
- have less than 100 employees (previously 20 employees); or
- make less than $10 million in annual turnover for the last income year.
What is considered an unfair contract term?
- Causes a significant imbalance in the parties’ rights and obligations arising under the contract.
- The term is not reasonably necessary to protect the legitimate interests of the party that would benefit from its inclusion.
- The term would cause financial or other detriment (e.g. delay) to an individual or small business if it were enforced.
What are the consequences of an unfair contract term?
Unfair terms will be deemed void by the courts, which means they will be unenforceable at law. However, the addition of new penalties means that a court could also impose a fine of up to $50 million.
What does this mean for NTI’s Clients?
- This move might protect small transport operators from unfair contracts forced on them by larger companies such as cargo owners, fleet operators, construction companies and miners.
- However, smaller carriers seeking to use written agreements (such as standard trading conditions) to totally exclude their own responsibility for damaged cargo in transit might find those contract terms are void and as a result may have to pay for cargo damage.
- This could mean that some carriers might be left paying the bill themselves if they don't hold carriers insurance or do not have adequate accidental damage cover.
- Carriers should ensure that they have appropriate comprehensive cover and review their standard contracts for unfair terms.
NTI Carriers Protect
NTI Carriers Protect policy can provide “AD” (Accidental Damage) protection as well as access to cover under the Carrier’s Cargo Legal Liability additional benefit (if we have approved the standard trading conditions at the start of the policy period) helping transport operators manage exposures.
Where to get more details and helpful tools:
This information is general only and does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the policy document.