Will proposed reforms to Unfair Contract Terms regime affect the building and construction industry?
September 10, 2021
In late August 2021 the Federal Government released exposure draft legislation which proposes reforms to the Unfair Contract Terms (UCT) regime under the Australian Consumer Law and Australian Securities and Investment Commission Act 2001 (Cth). This is legislation that protects consumers and small businesses from UCTs in standard form contracts.
The Treasury Laws Amendment (Measures for a Later Sitting) Bill 2021: Unfair contract terms reforms (the draft bill) seeks to enhance protections for consumers and small businesses, including by:
- providing that parties to consumer or small business standard form contracts are prohibited from proposing, applying or relying on an UCT; and
- strengthening remedies and enforcement powers under the UCT regime, including by:
- providing courts with the power to impose pecuniary penalties for parties proposing, applying or relying on an UCT provision in a standard form contract; and
- streamlining courts’ powers to make orders to void, vary or refuse to enforce, part or all of a contract.
Significantly for the building and construction industry, the draft bill proposes to expand the class of contracts subject to the UCT regime by:
- broadening the definition of “small business” to capture businesses employing fewer than 100 people, or less than $10 million in annual turnover; and
- removing the contract value threshold, such that the proposed UCT regime would apply to an expanded class of small business standard form contracts.
Accordingly, it appears that the proposed Competition and Consumer Act 2010 (Cth) reforms could capture some building and construction contracts, where:
- it is a “standard form contract”, informed by factors like repeat usage and the ability to negotiate;
- one of the parties to the contract falls within the expanded definition of “small business” above; and
- it is a contract for the supply of goods or services, or a sale or grant of interest in land.
The proposed amendments would apply to contracts entered into after the commencement date, or terms of existing contracts renewed or varied after the commencement date.
A copy of the draft bill can be viewed here. The Government has invited stakeholders to express their views and make submissions on the draft bill between now and 20 September 2021. We will provide updates on the progress of the proposed reforms as they become available.