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 print.
- 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.