The reforms were introduced by the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 and took effect from November last year.

Under the reforms, businesses will be prohibited from proposing, using, or relying on unfair contract terms in standard form contracts with consumers and small businesses.

The changes will also allow courts to impose significant penalties on businesses and individuals that engage in this conduct (whereas previously, a court could only declare specific terms of a contract unfair and therefore void).

The Australian Competition and Consumer Commission (ACCC) urged businesses to consider both points of view if they believe a term is necessary to protect their business’ legitimate interests. It also warned businesses against including terms that are too broad and ensure these are only as broad as reasonably necessary to protect the business’ legitimate interests.

Navigating a legitimate business interests defence

Alansari – who will provide tools on how to master contract management and address unfair terms at the summit – said that while the Australian consumer law prohibits unfair contract terms and businesses could cite “legitimate business interest[s]” as a defence under the prohibitions, it is a grey area.

When the legitimate business interests defence is applicable, there are two ways corporate counsel could address it, he suggested.

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“Firstly, the sooner and better you can get to know your in-house client (that is, your organisation), the more able you are to advise them on what is unfair and risky,” Alansari told Lawyers Weekly.

“This is because sometimes when you’re starting off in a new organisation, you need to keep in mind that what might have otherwise been unfair or risky for someone else might not be so for this organisation.

“It’s about developing a deep understanding of your organisation. Unfortunately, there’s no real substitute except taking the time to get to know them.”

Being present in the office, interacting with the C-suite and executives, and becoming involved with different committees within the business could help corporate counsel become well acquainted with their business, Alansari said.

Secondly, echoing the ACCC’s recommendations, Alansari advised corporate counsel to consider the point of view of the other party to understand why they may be attempting to pass on those unfair terms to the organisation.

The art of persuasion

“I’m always reminded of Greek philosopher Aristotle, who came up with three principles for persuading people. I still use them every day and they can be used in this context,” he said.

Aristotle posited that the art of persuasion consists of three parts: logos (appealing to logic), pathos (appealing to emotions), and ethos (appealing to ethics, morals, and character).

In relation to logos, a persuader uses their existing knowledge along with statistics, facts, and quotations from reputable researchers and sources to present a strong argument.

The persuader would combine logos with pathos to deliver the facts in a manner that connects with the audience at an emotional level to evoke empathy.

“Empathy is important to understand why the other party might have included unfair or risky terms. Put yourself in their shoes. Ask yourselves if you can meet them in the middle to minimise risk,” Alansari said.

Ethos relates to the persuader’s reputation, character and identity because the audience is more likely to respond positively if they are an honest, credible person.

“In the legal context, ethos means an in-house lawyer’s client has clean hands,” Alansari said.

“For example, I find it beneficial to be working in a government organisation at the moment because when it comes to contract negotiations, people usually trust a government agency. If your business has a good reputation, then you can use ethos (or morality) to prove that you are genuine in your negotiations.”

What good contract management looks like

To achieve negotiation excellence, in-house lawyers would benefit from clarifying what they wish to reap out of the contract.

“This sounds simple but it’s something that is often overlooked,” Alansari said.

In-house lawyers must collaborate with key stakeholders in their organisation to detail the goods and services and the specifications that should be included in the contract.

Alansari concluded: “Make sure those details make their way into the contract in a binding and usable way, because once you have that connection and nexus the way you want and the document is legally binding, then it’s simply about administration.

“You don’t need to be a lawyer. You just need to be able to read the contract and work with the other side to deliver benefits to both parties.”

To hear more from Omro Alansari about how to master contract negotiation and address unfair terms, come along to the Corporate Counsel Summit 2024.

It will be held on Thursday, 2 May at The Star, Sydney.

Click here to buy tickets and don’t miss out!

For more information, including agenda and speakers, click here.