Unfair Contract Terms – ASIC Class no-action letter

 

AFMA made an application for no-action relief in advance of the changes to the UCT regime in 2023. Following commencement of the Unfair Contract Terms (UCT) reforms on 9 November 2023, ASIC granted a limited class no-action position for institutional markets which were unintentionally captured by the revised small business contract definition.

The no action letter addressed to AFMA is here and can also be found on the ASIC website here:

https://download.asic.gov.au/media/wj0j54t5/20240205_final-class-uct-no-action-letter_publish-version_05022024.pdf

The unfair contract terms law applies to a term in a small business contract if:

• at least one party to the contract is a ‘small business’
• the contract is a ‘standard form contract’
• the contract is for a financial product or service, and
• the contract was entered into or renewed on or after 12 November 2016, or a term in an existing contract was varied on or after 12 November 2016.

A contract is a small business contract if:

• at least one party to the contract is a ‘small business’ – that is, a business that employs fewer than 100 people at the time the contract is signed (including casual employees employed on a regular or systematic basis, and part-time employees as an appropriate fraction of a full-time equivalent employee) or has a turnover for the last income year of less than $10,000,000, and
• for contracts for financial products or services, the upfront price payable under the contract does not exceed $5,000,000, for other types of contracts, there is no cap.