Contracts are crucial in the business world, especially in the building and construction industry. They
outline the rights and responsibilities of each party involved. However, not all contract terms are fair
or equitable. The Australian Competition and Consumer Commission (ACCC) has been working to
broaden the application of unfair contract terms laws since their introduction in 2010. These reforms
are essential to protect not only consumers but also small businesses from unfair contract terms.

Are your construction contract terms unfair?

Unfair contract terms laws have been in place since 2010. While originally these laws were in place
to protect consumers, since their introduction, the ACCC has pushed for reforms to broaden the
application of the unfair contract terms laws.

The upcoming changes will expand the class of standard form contracts that fall within the regime
and broaden the definition of what is a ‘small business’. This means that more businesses will be
protected under the new laws. Additionally, the changes will introduce penalties for businesses that
propose, use, or rely on unfair contract terms in standard form contracts.

As a result of these reforms, there will be significant changes to the unfair contract terms laws from 9
November 2023. Importantly, these changes will expand the class of standard form contracts that
will fall within the regime and broaden the definition of what is a ‘small business’. All businesses, and
in particular building and construction businesses, need to assess how these changes will impact
their standard contracts and contract terms before the new laws are in force.

It is crucial for businesses to comply with the new laws as failure to do so can result in significant
penalties. Businesses that propose, use, or rely on unfair contract terms in standard form contracts
may face financial penalties. Additionally, terms found to be unfair by a court will be void and will no
longer apply to the parties involved. If the rest of the contract can continue without the unfair term,
then the rest of the contract will continue to apply.

A summary of the key changes are set out below:

What types of terms may be ‘unfair’

There is no exhaustive list of what will be an ‘unfair’ term. However, based on recent ACCC investigations and prosecutions, it is likely that a term will be found to be unfair if the term:

1. enables one party (but not the other) to avoid or limit their obligations under the contract;

2. enables one party (but not the other) to terminate the contract;

3. penalises one party (but not the other) for breaching the contract;

4. enables one party (but not the other) to vary the terms of the contract;

5. includes automatic ‘roll-over’ clauses;

6. imposes liquidated damages or penalties;

7. provides a broad unilateral indemnity; and

8. seeks to impose a cap a limitation on liability.

What can I do to prepare for these changes?

It is essential for all businesses, especially those in the building and construction industry, to review their existing contracts and identify any terms that pose a risk of being ‘unfair’. Seeking legal advice from experienced legal professionals in respect of potentially unfair contract terms as soon as possible is crucial to ensure compliance with the new laws and to avoid penalties.

Call Rose Litigation Lawyers to speak with an experienced building and constructions lawyer today!

The content of this publication is intended to provide a summary and commentary only. It is not intended to be comprehensive nor does it constitute legal advice, and has been prepared based on applicable legislation and case authority at the date of publication. You should seek legal advice on specific circumstances before taking any action.