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Protection for Small Businesses from Unfair Contract Terms

Amendments to the Competition and Consumer Act 2010, will see protections for small businesses from unfair terms in standard form contracts entered into or varied on and from 12 November 2016.

Presently, protections in respect to unfair terms in standard form contracts apply only to consumers.

The new protections apply to small businesses who are a party to a standard form contract for the supply of goods or services or the sale or grant of an interest in land where the upfront price in the contract is less than $300,000.00 or $1,000,000.00 over a contract term of more than 12 months.

A small business is defined as a business with fewer than 20 employees, which includes all casual employees who are employed on a regular and systemic basis.In simple terms, a standard form contract is a contract proffered by one party to a transaction on terms that are not negotiable.

The Legislation provides examples of contract terms that might be unfair, including but not limited to:

(a)    A term that permits, or has the effect of permitting, one party (but not the other party) to terminate the contract;

(b)    A term that penalises, or has the effect of penalising, one party (but not the other party) for breach or termination of the contract;

(c)     A term that permits, or has the effect of permitting, one party (but not the other party) to vary the terms of the contract; and

(d)    A term that limits, or has the effect of limiting, one party’s right to sue another party.

If a court or tribunal determines that a contract term is unfair, then that particular term is void and unenforceable. The contract will otherwise continue to bind the parties provided it is capable of doing so without the unfair term.

There are some contracts and terms that are excluded from the operation of the Legislation in relation to unfair terms. See sections 26 and 28 of the Legislation.

If you have any questions regarding unfair contract terms or any business law matters, you should contact the experienced lawyers and solicitors at Burt & Hanke Legal servicing Albury, Wodonga and surrounding areas.