Unfair Contract Terms in Victorian Property Contracts
- Unfair Contract Terms (UCT) reforms have taken effect on 9 November 2023.
- The reforms will make UCTs illegal, attracting substantial penalties.
- ASIC has updated its guidance material on UCTs, available on the ASIC website.
Types of terms that are or may be unfair
Contract terms are unfair if they:
- cause a significant imbalance in the rights and obligations of the parties under the contract
- are not reasonably necessary to protect the legitimate interests of the party who gets an advantage from the term, and
- would cause financial or other harm to the other party if enforced.
In deciding whether a term is unfair, a court can consider any matters it thinks relevant but it must consider the contract as a whole and whether the term is transparent.
The law sets out examples of terms that may be unfair, including:
- terms that allow one party (but not the other) to avoid or limit their responsibilities under the contract
- terms that allow one party (but not the other) to end the contract
- terms that penalise one party (but not the other) for breaching or ending the contract
- terms that allow one party (but not the other) to change the terms of the contract.
For information about unfair terms in contracts for financial products and services, such as loans and financial advice, contact ASIC, which regulates these types of contracts.
Changes to the law
A change to the law came into effect on 9 November 2023 that will ensure that small businesses will be covered by the unfair contract terms protections for any new or varied standard form contract from that date if they:
- have 100 or fewer employees, or
- make less than $10 million in annual turnover.
Effect of having an unfair contract term
If a court decides that a term is unfair, it will be ‘void’. This means it will no longer apply to the parties to the contract.
If the rest of the contract can continue without that term, then rest of the contract will continue to apply to the parties.
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Source: ASIC (2023) (Accessed 28 November 2023)