The Commonwealth Government has introduced its new unfair contract terms legislation to parliament by the Trade Practices Amendment (Australian Consumer Law) Bill 2009 (the Bill).  The Bill amends the Trade Practices Act 1974 (TPA) and the Australian Securities and Investments Act 2001 (ASIC Act).

The changes to the TPA and ASIC Act regarding unfair contract terms are largely the same. 

Click here to view our previous article comparing the Victorian unfair contract terms legislation and the new Commonwealth legislation.  That article has been updated to reflect the changes in the Commonwealth proposals from the exposure draft.

Why amend the ASIC Act also?

The ASIC Act changes will deal specifically with unfair contract terms with respect to financial products including loan contracts.

How is the Bill different from the exposure draft?

Although the Bill is largely similar to the exposure draft, there are some important differences.  Most significantly, the Commonwealth unfair contract terms legislation will not now cover business to business contracts.  Instead, the unfair contract provisions will apply only to standard form consumer contracts, being contracts for:

• the supply of goods or services; or
• a sale or grant of an interest in land;

to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption.

When will the Bill commence?

The Bill will be implemented by an application law scheme, which means that each state and territory must pass corresponding legislation.  This is similar to the system used for the current Uniform Consumer Credit Code (the Uniform Consumer Credit Code uses Queensland instead of Commonwealth template legislation). 

It is proposed that the law will commence on the date the corresponding legislation commences which is expected to be between 1 January 2010 and 1 January 2011.

Non-party redress

An important feature of the Bill is that it provides consumers who are not a party to an action with the ability to be granted redress.  This means that a court can determine that a class of people who are impacted by unfair contract terms (or indeed other sections of the TPA or ASIC Act) can be granted relief. 

For example, if a fee in a contract is declared unfair, all consumers charged that fee may be entitled to a refund.  It will therefore be important for lenders to ensure that credit contact terms are fair, as well as clear, concise and transparent.