The business world is abuzz with preparations for the new unfair
contract law but have you considered the fact that if your business
has commercial leases, they too could be affected?
To provide a little background, Australian Consumer Law
currently covers a series of unfair contract terms. Currently,
these only apply to consumer contracts however, as of 12 November
small business contracts will be included in the provisions.
Following implementation, the law will apply to standard form
contracts entered into, renewed or varied from, and inclusive of,
A standard form contract is as a contract that has been prepared
by one party to the contract with no room for the other
party/parties to negotiate the terms.
Under the new law, any agreement entered into involving a small
business – that is, a business employing 20 or less employees
- will be subject to the changes. The contract must be related to
the supply of goods or services, or sale or grant of an interest in
land; and the upfront price under the contract mustn't exceed
either $100,000 - or $250,000 if the contract duration is more than
Many commercial leases will qualify as small business contracts.
Contracts for the grant of interests in land, commercial leasing
contracts are often entered into by businesses employing fewer than
20 persons, are frequently longer than 12 months and contain
upfront prices that don't exceed the threshold.
What terms are considered unfair?
Ultimately a Court or tribunal will make the call on whether a
term is unfair but examples set out by the law include:
Terms that enable one party (but not another) to avoid or limit
their obligations under the contract
Terms that enable one party (but not another) to terminate the
Terms that penalise one party (but not another) for breaching
or terminating the contract
Terms that enable one party (but not another) to vary the terms
of the contract.
If your contract is found to have unfair terms...
If it's found that a term in your contract is
'unfair' then it will be held to be void. The remainder of
your contract will remain binding in so far as is possible without
the offending term. Currently, there are no fines or penalties
which may be imposed for having a term declared unfair, however
other relief may be available to the party who has brought the
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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