New Laws to Void Unfair Contract Terms for Small Businesses

Wednesday 3 August 2016 @ 12.00 p.m. | Trade & Commerce

The Australian Competition and Consumer Commission (ACCC) has urged businesses in the agriculture sector to review standard form contracts that are provided to farmers and other small business sectors. From the 12 November 2016, the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 (No. 147)(The Act) will commence and will extend unfair contract protections to small business contracts.

Background to the Act

The Act, when commenced, will apply to all standard form contracts entered into or renewed after 12 November 2016. The law will extend the unfair terms regime found in the Australian Consumer Law to standard form contracts where at least one party is a small business and the upfront price payable under the contract does not exceed $100,000 (or $250,000 if the contract has a duration of more than 12 months).

The New Laws

Under the new laws, unfair terms in a contract may be held by a court to be void. In this circumstance, the contract can still continue to bind the parties, but only if it can operate without the unfair term. Unfair terms will be decided on the basis where it unfairly benefits one party over another.

It should be noted that the law does not make it an offence to include unfair terms. However, if a party does attempt to enforce an unfair term, remedies can apply such as court awarded compensation. ACCC Commissioner Mick Keogh commented:

“Imbalances in bargaining power are particularly common in agriculture supply chains and the ACCC wants farmers to be aware of these new protections, to ensure they get a fair deal when entering into a standard form contract with a larger business.”

He further explained that the law would combat situations where small business owners have no option but to acquiesce to unfair terms issued by larger businesses.

Mr Keogh said:

“The ACCC will be working with agriculture businesses and those that supply goods or services to the sector to promote compliance with the law."

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