Unfair contract term civil penalties will commence on 10 November 2023. Background.

Amongst other things, it will be illegal for standard-form contracts for consumers and small businesses to contain unfair terms such as unilateral variation clauses.

Variation clauses will be likely unfair if they enable service providers to unilaterally vary the terms of a contract, including pricing, without sufficient notice of the change and the opportunity for the customer to terminate the contract to avoid the variation without an early termination penalty.

Standard contracts should be reviewed before then to ensure they do not contain unfair terms.

Although the current law does not carry civil penalties, it does provide that unfair contract terms are void. This law applies to ASIC’s action against PayPal.

ASIC has commenced proceedings against PayPal Australia Pty Limited (PayPal) alleging that its standard form contracts with small business customers contain an unfair contract term.

The case involves a contract term that gives PayPal business account holders 60 days to notify PayPal of any errors or discrepancies in fees that PayPal has charged them, or else accept those fees as accurate.

ASIC alleges the term is unfair because the effect of the term is to permit PayPal to retain fees it has overcharged or wrongly charged if the small business does not notify PayPal of the error within 60 days of the fee appearing in its account statement.

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