We know term three means schools start thinking about next year’s enrolments and many schools have already set their budget and approved the 2024 fees. For the 2024 school year, there will be changes to the Australian Consumer Law which may cause you to update the documents which constitute your Enrolment Agreement with families. We take a look into these changes, scheduled to come into effect on 10 November 2023, for the perspective of independent schools. Here’s what to know:
What is an unfair contract term?
A term in your enrolment agreement may be unfair if it:
- would cause a significant imbalance in the parties’ rights and obligations arising under the contract;
- is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
- would cause detriment (financial or otherwise) to a party if it were to be applied or relied on.1
Whether a contract term is ‘unfair’ depends on the particular circumstances of that contract and ultimately can only be determined by a Court. There is a recent decision from the ACT Civil and Administrative Tribunal about an Enrolment Agreement: Brindabella. We wrote about this here.
Brindabella found:
- the enrolment Agreement was a standard form contract, meaning the Australian Consumer Law applies; and
- the term’s fees in lieu of notice was an unfair contract term because:
- there was a significant imbalance resulting from the school’s ability to vary fees without the parents being able to withdraw their children without penalty.
- I.e., the school could vary fees in Term 4, but require one term’s notice for withdrawal and therefore charge the term’s fees in lieu of notice.
What is changing in the Australian Consumer Law?
The use and application of, or reliance on, unfair contract terms is prohibited. Previously, unfair contract terms could be deemed void and unenforceable by the Court. Now that unfair contract terms will be prohibited, the Court can impose financial penalties for breaches of this prohibition. This change is a stronger protection for consumers.
For the Australian Consumer Law to apply, and the possibility of an unfair contract term to be relevant, a contract must be considered a “standard form contract”. The changes are expanding the definition of “standard form contract”, and therefore the application of the Australian Consumer Law.
More information from the Australian Competition and Consumer Commission is here.
What are the risks to schools?
In the current economic climate, and with many schools increasing fees in response to the payroll tax, there is a commonly felt “pinch” in the industry and among parents. This increases the risk that parents may (among other things):
- unfortunately have to withdraw their children; and
- challenge terms in Enrolment Agreements that require them to pay a term’s fees in lieu of notice under the Australian Consumer Law.
In July 2022, we recorded a webinar which you can watch for free to get you started on any updates that may be needed, both in response to Brindabella, and these amendments to the law.
Another risk is that the Australian Competition and Consumer Commission (ACCC) may prioritise enforcement of these new laws, and proactively take legal action against organisations who are in breach of the Australian Consumer Law.
How we can help
Enrolment Agreements can be complicated. You are providing a service to the students you are educating, but you are contracting with parents. You are entering into an agreement for Prep and seeking to enforce that agreement years later. We can help update or redraft these contractual documents in a manner that reduces the risk of any breaches of the Australian Consumer law, but also to give you strong contractual rights to collect fees critical to ongoing operations. We also work in disputes when there are termination or withdrawal or enrolments, or other disputes with parents.
Contact us
Please contact us for more detailed and tailored help.
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Disclaimer: This article provides general information only and is not intended to constitute legal advice. You should seek legal advice regarding the application of the law to you or your organisation.
1Competition and Consumer Act 2010, Sch 1 “Australian Consumer Law”, s 24(1).