Unfair Consumer Contract Term Protections Will Extend to More Small Businesses
By Peter North and Caroline James
The Senate has supported the proposed extension of unfair consumer contract terms to small businesses extending the coverage to 95% of small businesses.
The Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 was passed by the Senate on 14 September 2015.
On 13 October 2015 the Hon Kelly O’Dwyer MP (the new Minister for Small Business and Assistant Treasurer) announced that the government had worked with crossbenchers, and it would support the Greens’ amendments to increase coverage of the unfair contract term protections.
Originally, it was proposed that the Bill would commence six months after Royal Assent. Under the amended Bill, it will commence 12 months after Royal Assent. It is not clear whether the government will support this amendment in the House of Representatives.
When will the Bill apply?
The provisions will apply if:
The contract is a standard form contract; and
At the time the contract was entered into, at least one of the parties to the contract is a small business (fewer than 20 persons); and
Either:
The upfront price payable under the contract does not exceed $300,000 (for contracts that have a duration of less than one year); or
The upfront price payable under the contract does not exceed $1 million (for contracts that have a duration of more than one year); and
The contract terms are unfair.
What does unfair mean?
A term is unfair if:
It would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
It is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
It would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
Examples of unfair terms are those that permit, or have the effect of permitting, one party to assign the contract to the detriment of another party without that other party’s consent, and terms that limit, or have the effect of limiting, a party’s right to sue another party.
Exceptions to the unfair contract term provisions are terms that:
Define the main subject matter of the contract;
Set the upfront price payable under the contract (the amount that is provided for the supply or sale under the contract); or
Are required or expressly permitted by a law of the Commonwealth, a state or territory.
What happens if a term is unfair?
If a contract term is found to be unfair, it is deemed void as is treated as though the term never existed. This means that you will not be able to rely on it in Court.
What should I do now?
We recommend determining whether you are a small business or are a business dealing with a small business and whether the Act will apply to your situation, and looking through the Terms and Conditions of any relevant contracts to see whether any are unfair towards you or the business you deal with.
If you would like advice on your standard form contracts and whether any of your terms would be deemed unfair, please contact Peter North, Senior Associate, or Caroline James, Lawyer at Lewis Holdway Lawyers on 03 9629 9629.
