Consumer law reform - Unfair contracts
Some franchisees and franchisors may be aware of the bill that has recently been introduced to Federal Parliament which provides consumers and regulators (such as the ACCC and the ASIC) with enhanced rights and powers to challenge "unfair" terms in standard form contracts.
At this stage it is difficult to determine what impact the proposed bill will have on the franchise relationship and standard form contracts that arise in the franchising context.
The proposed legislation will include a new national consumer law, known as the Australian Consumer Law, and will be based on the existing consumer protection provisions of the Trade Practices Act.
Among other features, the proposed new law will promote consumer protection by:
- regulating unfair terms in standard form consumer contracts;
- introducing additional consumer rights; and
- introducing new penalties and enforcement powers.
The Minister intends to introduce a second Bill in early 2010 with a view to the entire Australian Consumer Law being in force by 1 January 2011.
The proposed new law will focus on "unfair terms" in standard consumer contracts. Standard consumer contracts are contracts where the terms are not negotiated by the consumer; for example mobile phone contracts, vehicle hire contracts and gym memberships. These types of contracts are already drawn up and are presented to the consumer on a take it or leave it basis.
The application of these provisions of the proposed new law has been limited to standard form consumer contracts only. This means that franchise agreements, retail leases and other business-to-business contracts are not subject to the proposed new law. Yet a media release by Minister Dr Craig Emerson has indicated that the Federal Government will be reviewing the Franchising Code of Conduct and that it will consider the issue of business-to-business standard form contracts when that review is complete.
Given this, the best advice for franchisees and franchisors over the next few months is to sit down with their lawyer and analyse any standard form consumer contracts that they use in their business, line by line, to ensure that they are compliant. In relation to business-to-business standard form contracts, we will have to wait and see what unfolds.
For further information on franchising, please contact Carolyn Meighan, Senior Associate, at cmeighan@talbotolivier.com.au or Russell Morley, Senior Lawyer at rmorley@talbotolivier.com.au.
