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Small businesses protected from unfair contract terms

November 20, 2015

Following a 12 month transition period, from 12 November 2016, a new law will protect small businesses from unfair terms in standard form contracts.

The law will apply where the contract:

  • is for the supply of goods or services or the sale or grant of an interest in land;
  • at least one of the parties is a small business (employs less than 20 people, including casual employees employed on a regular and systematic basis);
  • the upfront price payable under the contract is no more $300,000 or $1million if the contract is for more than 12 months.

The law will apply to standard form contracts entered into or renewed on or after 12 November 2016. If a contract is varied on or after this date, the law will apply to the varied terms.

Some examples of types of terms that may be considered unfair are:

  • 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 contract;
  • 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.

The ACCC, Australian Securities and Investments Commission, and state and territory offices of fair trading will enforce the new law, and if the court finds a term unfair, that particular term will be voided and treated as if it never existed.

Click here for more information.

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