New unfair contracts laws that apply to small businesses
may result in exclusion and limitation clauses being unenforceable
from 12 November 2016. Transport providers should review their
standard forms before the new laws come into effect to see if
amendments are required.
The Competition and Consumer Act 2010 (Cth) and
Australian Securities and Investments Commission Act 2001
(Cth) have been amended to extend unfair contract protection laws
to small business contracts.
Under the legislation, courts can declare that a term of a
standard form small business contract is void if the term is
From 12 November 2016, standard form contracts that are entered
into or renewed, or terms of existing contracts that are varied,
will be subject to the new provisions.
What is a standard form contract?
Under the Act, a standard form contract is one:
that is prepared before discussions between the parties;
where one party was required to either accept or reject the
contract as presented;
where there is no opportunity to negotiate; or
where the terms are not specific to one party or to the
These changes will have significant repercussions for the road
transport industry because transport operators routinely rely on
'standard form contracts', usually set out in fine print on
the reverse of consignment notes. These conditions usually seek to
exclude liability for loss of or damage to goods, regardless of
whether the damage was caused by the operator's negligence.
What is a small business contract?
A small business contract is one where:
at least one party employs fewer than 20 people; and
the upfront price payable under the contract does not exceed
either $300,000, or $1,000,000 if its duration is more than 12
When can a term be declared unfair?
A court may declare a term to be unfair if the term:
would cause a significant imbalance in the parties' rights
and obligations under the contract;
is not reasonably necessary to protect the legitimate interests
of a party; and
would cause detriment (financial or otherwise) to a party to
In determining whether a term is unfair, a court may also take
into account various factors including the extent to which the term
is expressed in reasonably plain language and is presented clearly
and readily to the party affected by it.
How will the changes affect transport operators?
From 12 November 2016, if goods are lost or damaged in transit
or storage, a 'small business' customer may argue that
certain common conditions of carriage are 'unfair' and
therefore void, including terms that:
exclude (or limit) liability for loss of or damage to goods in
transit or storage or consequential loss;
extend contractual benefits to subcontractors (Himalaya
reduce time limits for notification of claims under the
Until the new provisions are considered by the courts, it is
difficult to predict whether or not particular classes of clauses
will be determined to be 'unfair'.
What should transport operators do?
Transport operators should:
consider their current customer base to determine the extent to
which services are provided to 'small business'
consider whether their current insurance arrangements are
review their standard conditions of carriage to ensure
any terms that might potentially be considered unfair are
expressed in clear and unambiguous language; and
any clauses that exclude or limit liability for claims
associated with loss of or damage to goods are drafted so as to
minimise the risk that a court will find the clauses to be
For example, the effect of such clauses should be summarised and
highlighted at the time the parties enter into the contract.
Winner – EOWA Employer of Choice for Women Citation 2009,
2010, 2011 and 2012
Winner – ALB Gold Employer of Choice 2011 and 2012
Finalist – ALB Australasian Law Awards 2008, 2010, 2011 and
2012 (Best Brisbane Firm)
Winner – BRW Client Choice Awards 2009 and 2010 - Best
Australian Law Firm (revenue less than $50m)
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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This decision will be significant to aviation industry participants in assessing whether claimants in the context of international or domestic carriage by air have commenced claims in an appropriate forum in Australia.
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