Key points

Under the new unfair contract terms (UCT) regime a penalty of up to AU$50 million ($2.5 million for natural persons) applies from 9 November 2023 if any standard form contracts contain UCT.
The incoming UCT regime may apply to agreements between lenders and aggregators and agreements between aggregators and brokers.

Background

Under the new UCT regime, unfair contract terms may not only be struck down, but a penalty of up to AU$50 million ($2.5 million for natural persons) applies from 9 November 2023 if any standard form contracts contain them (regardless of intention to rely on the clause).

Standard form contracts will be subject to the UCT regime if:

• one party to the contract is a small business with either fewer than 100 staff or a turnover for the last income year of less than AU$10 million; and
• the upfront price payable under the contract is AU$5 million or less.

How the UCT provisions may apply to agreements between lenders and aggregators (i.e lender-aggregator agreements) and to agreements between aggregators and brokers (i.e aggregator-broker agreements) is set out below.

The impact: What you need to know

Lender-aggregator agreements

An additional consideration for lenders is whether there are any material terms in the agreement to be passed on to the brokers.

Often lender-aggregator agreements require aggregators to ensure that brokers are subject to some of the rights and obligations under the agreement. Accordingly, even if the UCT regime does not strictly apply to the lender-aggregator agreement, it would be best practice to ensure that none of the terms are unfair if they will be imposed by the aggregator on its brokers because most brokers are small businesses and there is no opportunity for brokers to negotiate the terms with the aggregator.

Aggregator-broker agreements

The below comments also apply to contracts between broker businesses and their contractors.

Terms that may be unfair

If lender-aggregator agreements and aggregator-broker agreements are required to comply with the UCT regime, what terms are likely to be unfair? The following types of provisions should be paid close attention to.

• Exclusivity
• Conclusive evidence clauses
• Unilateral variation clauses
• Entire agreement clauses
• Termination rights
• Restraint on trade
• Customer ‘ownership’
• Term of agreement
• Indemnities / limitations of liability
• Set-off

Next steps

Lenders and aggregators should consider whether their template agreements need to be updated to remove / amend any UCTs, even if the agreements may be negotiated with the relevant party.
Dentons can assist with this process to ensure that lenders and aggregators can better understand their obligations brought by the new UCT regime.