Fair Trading Act - new application to small trade contracts
The Fair Trading Amendment Act 2021 brought in new provisions on 16 August 2022 to address unfair practices. These changes include:
Extending the unfair contract terms provisions to small trade contracts:
The existing unfair contract terms provisions (UCT) are being extended to small trade contracts. That is where the parties are both engaged in trade, at the time the relationship arose it did not exceed an annual value of $250K and where there is little or no ability to negotiate the contract. The UCT regime already applies to standard form consumer contracts which are contracts with consumers where there is little to no ability to negotiate the contract. A contract term is unfair if the court is satisfied that it:
(i) would cause a significant imbalance in the parties’ rights and obligations
(ii) is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and
(iii) would cause detriment (whether financial or otherwise).
The Act sets out examples of the kind of terms in a standard form contract that may be unfair. The examples include if one party but not the other is permitted to terminate, to vary the terms of the contract, to renew or not renew, to vary the price or the goods/services to be supplied, to determine if there has been a breach, to assign, to sue. This list is not exhaustive.
Restricting ‘unconscionable conduct’ which is a new but undefined concept:
Relevant factors that may be considered by a court in assessing unconscionable conduct is relative bargaining power of the parties, the extent they acted in good faith, if the affected person was able to protect their interests and understand any documents provided by the trader, if the trader used unfair pressure, tactics or unduly influenced an affected person.
We recommended considering if you have any standard form contracts and whether they are used with other parties who are in trade (or with consumers as these are already captured by the UCT rules). If you do, consider if they contain any terms which may be considered unfair under the regime. Please contact us if you would like to discuss. (Make an appointment online on our Contact Us page.)
