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22 March 2016 Unfair Business Contracts

By Euge Power, Solicitor

In Brief

In a major shift for Australian business, legislation will come into effect on 12 November 2016, which will change the way small businesses can negotiate and contract with other businesses.

As we wrote about it in a previous newsletter, d
on't get caught out by the new legislation.

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Generally, the law does not intervene when two business entities, regardless of their size, enter into a contract. However, following the passing of the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015, the Australian Consumer Law (located in Schedule 2 of the Competition and Consumer Act 2010) will be amended to introduce protection against unfair contract terms where one party is a small business.

The type of contracts affected are "small business contracts" where at least one of the parties has less than 20 employees and the price of the contract is within certain prescribed financial limits. 

The new legislation is an attempt to protect small businesses from unfair terms used in standard form contracts by larger businesses, where small businesses are at a significant disadvantage due to their more limited bargaining power.

Essentially, the protections provide an avenue for an unfair term in a standard form contract to be made void and unenforceable. Though it will not be an offence to include an unfair term in a small business contract, trying to enforce such a term may lead to the award of compensation.

However, what defines a standard form contract, or what is unfair, is only guided by legislation and will ultimately be determined by a court. This means that if the contract you wish to use falls into the small business contract category, you should check on the validity of the provisions in it, as this may significantly alter your negotiating position, whether you are a large business, small business or consumer.

We can help you review you check your contracts under the Australian Consumer Law, and take the next step towards protecting your business.



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This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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