Unfair Contract Terms. What does it all mean and what’s changing?

Are you a small business that employs less than 20 employees? Does your business use non-negotiable contracts with an upfront price value of less than $300,000? If you answered yes to any of either of these questions, then the new ‘unfair contract terms’ legislation may be applicable to your business.

Is your business affected and/or protected by the new ‘unfair contract terms’ legislation?

From the 12 November 2016, new legislation will be in force that directly impacts small businesses and the way they enter into contracts. If you are a small business that employs less than 20 employees (including on a casual basis) or you have a business that enters into contracts with small businesses of less than 20 employees, then this law could apply to you.

So what contracts are affected by the new legislation?

The new legislation applies to all contracts entered or renewed after the 12 November 2016 that involve an upfront price payable of less than $300,000 (or less than $1 million if the contract is over 12 months in duration). The contract must be for the supply of goods or services or the sale or grant of an interest in land, and relates to a ‘standard form contract’ (or in other words a contract where one party has no opportunity to negotiate the terms, but rather can ‘take it or leave it)’.

What does ‘unfair contract term’ mean?

The ACCC defines an ‘unfair contract term’ as a term that causes a significant imbalance to one of the parties’ obligations and rights. The term is also deemed unfair if it is not reasonably necessary to protect the legitimate interest of the party that could have an advantage by the term, with an end result being that the term could cause a financial or another detriment to a small business if it were relied upon. In determining whether the term is unfair, you would also consider how transparent the term is in the contract, as well as assess the term in light of the contract as a whole.

What can you do if you think a contract you have entered includes an ‘unfair contract term’?

Unfair Contract terms can only be determined by a court or tribunal. At Legally Yours we can connect you with a fixed-fee commercial lawyer for a contract review to see whether the ‘unfair contract term’ legislation applies to contracts in your business.

If you would like to book a Quick Match, please follow the links on the Legally Yours website.

This article is written by Karen Finch and was first published on the Legally Yours Website.

This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practising lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Legally Yours Pty Ltd accepts or assumes responsibility, or has any liability, to any person in respect of this article.

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