Many of you will have heard about the impending new unfair
contract regime which will be implemented later this year, from 12
The law aims to curb the potential for small businesses to be
disadvantaged by unfair contract terms which are enforced in common
Due to be implemented from 12 November, the law will apply to
any standard form contract entered into or renewed on or after this
date. If changes are made to a contract on or after this date, the
law will also apply to the varied terms.
Is your franchise agreement a standard form contract?
The big question if you're in the franchising sector is
whether or not your franchising agreement is considered to be a
standard contract form.
Defined as a contract that has been prepared by one party to the
contract with no room for the other to negotiate the terms, a
standard form contract can be a software license, equipment rental
agreement, finance contract or supply and distribution agreements.
It can also be a confidentiality agreement, trading terms and yes,
a franchise agreement.
The new law affects any agreement where one of the parties is
considered a 'small business' – that is, a business
employing fewer than 20 employees. Most franchisors won't fall
under this definition however most franchisees will. On this point,
the ACCC has indicated that the balance of power between
franchisors and franchisees may become more equitable following the
Franchisors who adopt a more collaborative approach in
developing and finalising their contracts are likely to be less
affected. Conversely, if your business model favours a more rigid
approach with little or no room for discussion from the other
party, you may find it difficult to argue that your franchise
agreement isn't a standard form contract.
In addition to those terms outlined as being exempt for all
small businesses under the new law, you should take note of terms
found specifically in franchising agreements that will be exempt
from the new law such as those that deal with payment of initial
fees, ongoing franchise fees, training fees and marketing fees.
Terms requiring further payments as a result of happening or not
happening throughout the term – early termination fees, late
payment fees, transfer fees, renewal fees, liquidated damages and
interest – are among those unlikely to be exempt.
All businesses should review and seek advice on any standard
term contracts which may be used, in order to consider if there is
any risk that various terms could be declared void for being
Attend our Novotel Norwest breakfast briefing to learn
Ensure your franchise is prepared and that your standard form
contracts are compliant ahead of the new unfair contract regime.
Book now to join Coleman Greig Lawyers on Thursday, 11 August
at the Novotel in Norwest, for a comprehensive briefing on how the
new legislative landscape will affect your business.
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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Do not depart from the contract terms, or encourage the other party to do so, unless you plan to alter the contract.
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