Date published: 25/10/2016
It’s certainly the big news in commercial contracts for this year! And now the date for these changes to the unfair contracts legislation (contained in the ASIC Act and Australian Consumer Law) which extend it to small business contracts, is imminent: the key date is 12th November 2016.
In short, this legislation concerns itself with contracts where:
- at least one of the contracting parties is a “small business” (< 20 employees); and
- that contract is also a “standard form contract”.
Although you or your clients may constitute a small business, don’t be overly alarmed! Rather just be aware and prepared. To do that – note the following basics:
If any such terms of a standard form contract involve a small business are found by a court to be “unfair”, they may be void and therefore unenforceable.
This fact will have an impact on the importance of the parties conducting genuine negotiations.
Determining if a term is “unfair” is not necessarily straightforward.
As the latest legislation has essentially extended the protection previously applicable to “consumer contracts” to “small business contracts”, the ACCC has provided guidance on some example terms which may be considered unfair.
Three examples are a contract term that:
- enables one party (but not another) to terminate the contract;
- penalises one party (but not another) for breaching or terminating the contract; or
- enables one party (but not another) to vary the terms of the contract.
So one of the best and practical things you can do at this point is to consider the ACCC’s (excellent) guidance which can be found at: www.accc.gov.au/publications/a-guide-to-the-unfair-contract-terms-law
We have a short online course available on this topic and will soon have a Practice Guide on the subject. This will help put you on the right track in the first instance so that, as necessary, you seek the appropriate legal advice.
Peter Aston
Risk Manager