Legal Help Desk Changes to unfair contract terms lie ahead

Changes to unfair contract terms lie ahead:

how SSAA is responding to the reform

By Philippa Thorne, Tony Raunic and Emily Clapp, Hunt and Hunt Lawyers.

Philippa Thorne.

SSAA has recently updated the template agreements to reflect not only the changing way members are doing business in a post-pandemic, technologydriven world but to ensure that the agreements reflect changing legislative requirements in Australia.

The template agreements include the Standard Self Storage Agreement, the Managed Storage Agreement, the Mobile Storage Agreement and the New Vehicle Storage Agreement. It is important for members to understand how the strengthening of consumer laws across Australia and New Zealand impacts their dealings with storers.

Strengthening consumer laws

In August 2021, the Australian federal government released a draft bill for consultation which aims to strengthen the unfair contract terms protections for consumers and small businesses. The Australian government was expected to introduce the Bill sometime during the Parliamentary sitting period, which ended in December 2022. Similarly, in August 2021, the New Zealand Parliament passed the Fair Trading Amendment Act 2021, which introduced new protections against unfair conduct and unfair businessto-business contract terms. It is clear that change is on the horizon. Both governments and regulatory bodies have identified that the current laws do not sufficiently deter businesses from imposing unfair contract terms on consumers. If the proposed changes to the law are implemented, significant civil penalties may be imposed if a contract term is found to be unfair.

The ACL and ‘Standard Form Consumer Contracts’

The laws surrounding unfair contract terms apply to what are known as ‘Standard Form Consumer Contracts’. In Australia, a consumer contract is defined as a contract for the supply of goods or services, or the sale or grant of an interest in land, to an individual for personal, domestic or household use or consumption. A standard form contract is typically an agreement prepared by one party that is not negotiated between the parties – it is offered on a ‘take it or leave it’ basis, meaning that one party has all or most of the bargaining power in the transaction. The SSAA template agreements would be classified as Standard Form Consumer Contracts, as facilities supply storage services and use a standard set of terms that storers cannot negotiate. Facilities must take care to avoid imposing any unfair contract terms in their agreements.

What is an unfair contract term?

A term of a consumer contract is unfair if it: l would cause a significant imbalance in the parties rights and obligations arising under the contract; l is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and l would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on. If a contract term is found to be unfair, that term is void (treated as if it never existed). If the contract can operate without the unfair term, it will still be binding on all parties. Whether or not a term is unfair is a legal question and not for a facility to decide on its own. For example, the SSAA Legal Help Desk has assisted facilities to determine whether they can charge an early termination fee. Whether a facility can charge an early termination fee (or similar) depends on a number of factors, but primarily whether the fee is a genuine estimate of the loss the facility may suffer as a result of early termination. Some other examples of fees that would likely be unfair contract terms and considered a ‘penalty’ would be: l charging an ‘accelerated payment’, that is, the amount that would have been paid had the contract not been terminated; or

Tony Raunic.

Emily Clapp.

l if a storer had paid a discounted rate when signing up, charging the balance between the discounted rate and the standard rate in the event of an early exit from storage. We recommend contacting the Help Desk if you need assistance determining whether your arrangements with storers may be classified as an unfair contract term.

How do unfair contract terms impact facilities now and in the future?

Currently, the law does not impose penalties on a business that has unfair contract terms in its contracts. However, consumers and regulatory bodies can seek compensation for any loss that is incurred as a result of a term of a Standard Form Consumer Contract that is found to be unfair. The proposed changes to the unfair contract terms regime in Australia will have implications for businesses that use standard-form contracts. The key changes include: l expanding the regimes to apply to a broader range of business contracts; l more significant penalties and a broader range of remedies for breach of the regime; and l a rebuttable presumption that similar terms to those declared to be unfair (in a party’s own contracts or other contracts in the industry) are unfair.

Takeaway

The updated SSAA template agreements have been carefully drafted with the upcoming changes to the Australian Consumer Law in mind. It is for this reason that we advise against facilities amending the SSAA template agreements, as this can create inconsistencies in facilities dealings with storers, and may make enforcement more difficult. If you are applying any terms, fees or penalties that are outside of the usual scope of the SSAA template agreements, we recommend contacting the SSAA Legal Help Desk for assistance. l

Disclaimer: The information contained in these answers is of a general nature and is not intended as legal advice. It is important that you seek legal advice that is specific to your circumstances. Please refer to the SSAA’s website for more information on the SSAA’s Legal Help Desk.

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