But that’s Unfair! Extension of Unfair Contract Term Protections to Small Business

The Government is continuing its drive to extend the consumer unfair contract terms protections applying to standard form consumer contracts to small business by releasing an Exposure Draft of the proposed amending legislation Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015.

The Exposure Draft provides that the unfair contract terms protections will also apply when:

• at the time the contract was entered into at least one of the parties to the contract is a small business (a business that employs fewer than 20 persons ); and
• either of the following applies:
  o   The upfront price payable under the contract is $100,000 or less.
  o   The contact has a duration of more than 12 months and the upfront price payable        under the contract is $250,000 or less.

If a contract term is found to be unfair, then it is deemed void and is treated as though the term never existed – this means you would not be able to rely on it in Court.

So what does it mean for a term to be unfair? A term is unfair if:

• It would cause a significant imbalance in the parties rights and obligations arising under the contact; and
• It is not reasonably necessary 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.

Two examples of terms that would be unfair are:

• A term that permits, or has the effect of permitting, one party to assign the contract to the detriment of another party without that other party’s consent.
• A term that limits, or has the effect of limiting, on party’s right to sue another party.

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, at Lewis Holdway Lawyers on 03 9629 9629.