From 12 November 2016, the laws providing protection against
unfair contract terms to individual consumers have been extended to
protect small businesses.
The extension of these protections are a result of amendments
made to the Australian Consumer Law (contained in Schedule 2 of the
Competition and Consumer Act 2010) and the Australian
Securities and Investment Commission Act 2001.
The changes made apply to standard form contracts:
entered into or renewed on or after 12 November 2016, but it is
important to note that if a contract which existed before that date
is varied on or after 12 November 2016 the law applies to it as
where at least one of the parties is a small business, being a
business that employs less than 20 people (including casual
employees employed on a regular and systematic basis); and
the upfront price payable under the contract is no more than
$300,000, or if the contract is for more than 12 months no more
The law does provide guidance as to:
What is a standard form contract – in
short it is considered to be in a standard form when it is prepared
by one of the parties with little or no ability or opportunity for
the other party to negotiate/amend the terms of the contract;
What is an unfair contract term – in
general, one that causes significant imbalance between the parties,
is not reasonably necessary to protect the interests of one party
and would cause detriment if relied on.
Advice should be sought on the individual circumstances of a
contract, as there are a number of exceptions to both the contracts
that these laws apply to and the terms within a contract that are
subject to the law.
What is important to remember is that if a standard form
contract is entered into and a Court or Tribunal determine that the
contract includes an unfair term that unfair term will be void and
When preparing or entering into a contract which may be a
standard form contract, it is equally important for consumers,
small businesses and any party preparing a standard contract to
seek advice on whether the law applies to the contract, and if so
to ensure that the contract does not include provisions that may be
Developing an understanding of how people behave is necessary to identify potential issues and risks and to make changes.
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