The Trade Practices Law landscape changed considerably on 1 January 2011, and if you haven’t yet had your contracts reviewed to incorporate the changes, now is the time to act. Urgently.
A failure to review your contracts could leave your business exposed if your contracts still have references to the Trade Practices Act, if you deal with any supply arrangements that relate to goods or services that will end up in the hands of “consumers”, or if you deal with any small suppliers.
Read on for an outline of the changes to the legislation, and its relevance to you.
What are the changes?
1. Change of name
The name of the Trade Practices Act 1974 has now changed to the Competition and Consumer Act 2010. So all of your contracts must be reviewed to ensure that references to the old Trade Practices Act are removed and replaced with the correct new references.
2. Guarantees to “consumers” – which can include both individuals and businesses
The legislation now contains “guarantees” that can’t be excluded or limited, for the provision of goods and services valued less than $40,000 and for products valued greater than $40,000 that are generally used for personal consumption. (This does not however include any product that is acquired for re-supply, or for use in trade or commerce).
This means that if your business provides goods or services that meet the definition above, then your business now under the legislation must “guarantee” various aspects of quality, fitness for purpose, and other items such as availability of repairs and spare parts – all of which are wider than the position under the old Trade Practices Act, and Fair Trading Acts. Additionally, your business is now unable to avoid, exclude or limit its liability in relation to various aspects covered by this new legislation and consequently, previous positions in relation to issues such as warranties have now changed. For example, the new warranty period is now the “reasonable” life expectancy of the good.
So in addition to ensuring that your customer contracts have been modified appropriately, your business must now ensure that any contracts that you have with your suppliers are reviewed to ensure you have clauses that mirror your new extended obligations.
What sorts of things might you need to change?
Here is an example of a few areas to review:
- Warranty clauses – make sure your suppliers provide you with warranties that extend at least as far as the new legislation now extends for end “customers”. Don’t be stuck with a gap between your manufacturer’s or supplier’s warranties, and those you must now provide to the end customers.
- Spare parts and facilities for repair of goods – ensure that your suppliers are locked in to continue to provide various spare parts that you may require to comply with the new legislation – including an appropriate period even after you may stop your sales or production.
- Other items of customer guarantees – make sure your suppliers provide your business at least the same level of guarantee that consumers now receive – including guarantees on the quality and the fitness for purpose etc. Many of your supply contracts may currently seek to limit or exclude these types of warranties, so now is the time to put the pressure on to get them back in.
3. Unconscionable conduct in relation to small suppliers
Section 22 of the new Australian Consumer Law now specifically provides that you must not act unconscionably when dealing with a supplier that is a small business.
Some of the things that a court may look at to assess whether there is “unconscionability” include:
– The relative strengths of the bargaining positions between you and your supplier
– Any conditions that go too far towards protecting your interests above those of your supplier
– Whether the supplier was able to understand the contract
– Any undue influence, pressure or tactics you may have used
– Whether you have the right to vary terms without needing the agreement of the supplier
– Your conduct, both at the time of entering the contract, and in your compliance (or failure to comply) with the contract terms.
Given this shift in the law, now is the time to make sure that you have an appropriate set of documents that you use with smaller suppliers, which may perhaps be a bit simpler than the set you use for larger suppliers and/or more complex deals.
Note: This summary is a very general summary of some of the headline changes. If you have any questions about the scope of the changes, and the relevance to contracts you are engaged in, contact us on 02 8006 0830 or [email protected] to organise a time for a discussion. Aspect Legal specialises in reviewing and drafting contracts in this area, and would be more than happy to assist.
We also provide training on areas such as the new legislation and its impact on supply contracts, through our sister business Aspect Educate. Click here for more details.