The start of 2021 signalled the end of the grace period for the new disclosure obligations on suppliers under the Fair Trading Act 1987 no 68 (NSW) (FTA). Suppliers must now ensure that their contracts comply with the FTA or face penalties.
The purpose of the new disclosure requirements, among other things, is to ensure that consumers are fully informed about the terms and conditions associated with the goods or services that they are looking to acquire.
Who needs to comply?
Suppliers providing goods or services to consumers must comply with the new requirement. For the purposes of the FTA, a “supplier” is a person who, in the course of a business, supplies goods or services.
The FTA has extraterritorial application. This means that suppliers need to comply if:
- they supply goods or services to a consumer in NSW;
- their actions affect a consumer in NSW; or
- their supply results in loss or damage to a consumer in NSW.
Even if the supplier operates from outside NSW or the contract is governed by law other than the laws of NSW. 1
What are the disclosure requirements under the FTA?
There are two new requirements under the FTA:
- suppliers must take reasonable steps, before supplying the goods or services, to ensure consumers are aware of the substance and effect of any term or condition relating to the supply of the goods or services that may substantially prejudice the interests of the consumer; and
- intermediaries must disclose referral fees and commissions.
This article will focus on the first of these requirements.
Who is a consumer?
For the purposes of the FTA, a “consumer” has the same meaning as under section 3 of the Australian Consumer Law (ACL).2 In a recent article, we discussed the definition of “consumer” which you can read by clicking here. In summary, a consumer is not restricted to individuals and may cover businesses (even large businesses) in a range of circumstances.
Situations where the interests of a consumer is “substantially prejudiced” include, but are not limited to, terms that:
- excludes the liability of the supplier;
- provide that the supplier is not liable for damage to goods that are delivered;
- permit the supplier to provide data about the consumer, or data provided by the consumer, to a third party in a form that may enable the third party to identify the consumer; or
- require the consumer to pay an exit fee, a balloon payment or similar payment.
Disclosing exclusions to supplier’s liability
We know that consumers are already afforded statutory protections (referred to as the consumer guarantees) under the ACL which cannot be excluded, restricted or modified by a term of a contract.3 However, the remedies for a breach of a consumer guarantee may be limited in some consumer contracts in accordance with section 64A of the ACL. For more information on consumer guarantees and the operation of section 64A of the ACL click here.
While the ACL already limits the rights of suppliers to exclude liability for breaches of applicable consumer guarantees, the ACL does not make it unlawful for suppliers to exclude liability for other categories of liability, such as breach of contract or negligence (except potentially under the unfair contract terms regime). Limitation of liability clauses for these categories of liability will now need to be properly disclosed in light of the changes to the FTA. It is also likely that limitation of liability clauses that are drafted in line with section 64A of the ACL will need to be disclosed in the manner required under the FTA.
The new disclosure obligation requires suppliers to be clear and upfront about any term or condition relating to the supply of the goods or services that may substantially prejudice the consumer’s interests (including those that exclude the liability of the supplier) before the goods or services are supplied. In doing so, consumers can be fully informed and enter into a contract for the supply of goods or services with their eyes wide open.
What does this mean for suppliers?
Suppliers need to re-think how they communicate to consumers. NSW Fair Trading provides the following examples on what steps suppliers may take to comply with their new obligations:
- using short, plain English summaries on the front page of a contract;
- providing information in short chunks at key times for the customer;
- making information appear on screen in a scrollable text (if online); and
- using comics, illustrations or icons to highlight and explain relevant information.
We recommend that all suppliers that supply goods or services to consumers in NSW (or whose contracts may otherwise have a connection with NSW as noted above) review their current contracts and procedures to ensure that they are compliant with the new requirements under the FTA. Failing to comply may result in penalties of up to $110,000 per contravention for corporations and $22,000 per contravention for individuals.
How can we help?
HWL Ebsworth Lawyers has a specialised consumer law team that can assist you with reviewing, drafting and updating your contracts and processes to ensure that they are compliant with the new disclosure obligations under the FTA.
This article was written by Teresa Torcasio, Partner, Connie Lambropoulos, Associate and Sylvia Tran, Law Graduate.
1. Section 5A Fair Trading Act 1987 no 68 (NSW).
2. Schedule 2 to the Competition and Consumer Act 2010 (Cth).
3. Section 64 of Schedule 2 to the Competition and Consumer Act 2010 (Cth).
