Protecting Your Business: Urgent Action Required for Unfair Contract Term Changes in November 2023

If you haven't already, you need to review your standard form contracts - as from 9th November 2023, big changes happen where it may be illegal to have an unfair term in your standard form contracts!

For those that reviewed their contracts a few years ago for unfair terms, this is not enough as the above illegality change and court interpretations since the unfair terms laws first came out have arguably made the approach to these terms very different.

Applicable Penalties:
The maximum financial penalties for businesses under the new unfair contract terms law are, for individuals $2.5 million, while for companies it is the greatest of:

- $50 million; or
- 3 x times the value of the "reasonably attributable" benefit obtained from the conduct, if the court can determine this; or
- if a court cannot determine the benefit, 30% of adjusted turnover during the breach period.

Which Contracts are impacted?
These changes apply to standard form contracts that are generally:

- made or renewed on or after 9 November 2023; and/or
- already in play but where they have a term varied or added on or after 9 November 2023, then the whole contract (and not just the changed term) will come under the new regime and penalties.

Examples of Impacted Standard Business Contracts
A few examples of contracts that may be regarded as standard form contracts and fall within the updated regime, include, but are not limited to:
- Membership/Service Agreements: Contracts outlining services provided to clients or customers.
- Supplier Agreements: Agreements with suppliers.
- Client Agreements: Businesses that engage clients for projects or services.
- Lease Agreements: Contracts governing property or equipment leases.
- Employment Contracts
- Loyalty Programs

The Risks
The imminent changes in unfair contract terms carry significant risks for businesses that are unprepared:
1. Financial Impact: Non-compliance could lead to substantial financial penalties, potentially exceeding previous limits. These penalties can strain your financial resources and disrupt your business operations.
2. Reputation at Stake: Violating consumer and competition laws could severely damage your reputation. Rebuilding consumer trust is challenging and may result in lost revenue and growth opportunities.
3. Contractual Vulnerability: Contracts containing unfair terms could be rendered unenforceable. This leaves your business without legal protection, potentially exposing you to litigation and disputes.

Taking Immediate Action
With time running out, proactive steps are critical and include engaging specialist legal and business assistance to:
1. Review and Revise Contracts: Initiate a comprehensive review of your existing contracts to identify unfair terms and promptly amend them (or have strategies and supporting material where amendments can be avoided or reduced) to align with the new regulations (as well as arguably community expectations).
2. Locate and Address Compliance Gaps:  Identify areas of risk exposure, then get recommendations and action steps for the strategies to address these gaps.
3. Protect Your Business Interests: Review where you are at and want to be at, then craft additional systems, procedures and documents that are legally robust, to protect your interests (business and personal) while complying with the evolving legal, business and consumer landscape.

Don't wait for November 2023 to arrive unprepared. Act now to safeguard your business (and personal) interests. Contact us immediately to ensure your contracts are compliant, resilient, and poised for success amidst the changing legal landscape. Our expert team stands ready to guide you through this pivotal phase, minimising risk and ensuring your business's continued growth and stability.

For more information on this area or to ensure you and your business are both protected with strong foundations to optimise your growth or exit (on your terms) get in contact now for a free no no-obligation Discovery Call.

Please note that this is a general and brief update, it does not purport to be comprehensive legal advice of all information and/or relevant to your circumstances. Consequently, specific legal advice for each of your circumstances should be obtained first before taking or not taking any action with respect to this area.