The ACCC recently released figures showing small
businesses being scammed out of over $2M in the last six months. So
it's just as well that come November, small businesses will be
able to take advantage of the unfair contract term rules in the
Australian Consumer Law.
The ACL already includes rules to protect consumers from unfair
contract terms in standard form contracts. These rules are being
extended to apply to small businesses that employ less than 20
people, for contracts with a value of less than $300,000, or $1
million if the contract is for more than 12 months.
The changes reflect a theme emerging in competition and consumer
law of late. Big guys, review your practices. Little guys, here
comes a helping hand.
Here is the low-down on the new unfair contract term rules.
The rules apply to standard form contracts. But what's a
standard form contract? Well they are those non-negotiable, one
size fits all contracts. For a small business, these might be
standard supply or consulting agreements used by big players with
terms you can't negotiate.
Examples of unfair terms might be a clause that allows one
party to unilaterally amend the contract, imposes additional fees
or liability regardless of fault, or that sets excessive interest
rates on money owing.
If the Court considers a term unfair, the term will be void and
the contract will only continue to be enforceable if it can operate
without the unfair term.
The new laws aren't retrospective, so for all those
companies entering into new contracts with small businesses after
November we'd highly recommend reviewing your standard form
contacts. On the flipside, small businesses that have contracts for
renewal after November might want to have a look at the fine
If the threat of voided contracts isn't enough for the big
businesses, then know this. The ACCC has recently been pursuing
unfair contract terms as a breach of the false or misleading
representation provisions of the ACL. The effect is that the ACCC
can seek pecuniary penalties of up to $1.1 million (which they
can't do for unfair contract terms). We think that's a
pretty sound incentive for businesses in Australia to start
reviewing their standard form contracts.
We do not disclaim anything about this article. We're
quite proud of it really.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Do not depart from the contract terms, or encourage the other party to do so, unless you plan to alter the contract.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).