Small Business Benefits from Unfair Contract Terms Law

Small Business Benefits from Law on Unfair Contract Terms : Effective 12 November 2016

The Australian Competition and Consumer Commission (ACCC) published details regarding the new small business law that came into effect from 12 November 2016. The legislation protects small business against unfair contract terms in standard form contracts.

The new law provides protection for small business in the case of:

  • supply of goods/services or sale/grant of an interest in land;
  • at least one of the parties is a small business;
  • the upfront price is no more than $300,000 or $1million if the contract extends beyond 12 months.
A small business is regarded as a business that employs less than 20 people, including regular casuals).

 Standard Form Contracts

The new law regards a standard form contract as
one that has been prepared by one party to the contract and where the other party has little or no opportunity to negotiate the terms – that is, it is offered on a ‘take it or leave it’ basis.”
 Some of the examples provided by the ACCC as potentially being unfair contract terms include contract terms that:
  • allow only one party to avoid or limit their obligations under the contract;
  • allow one party only to terminate the contract;
  • penalise one party only for breaching or terminating the contract;
  • favours one party only to vary or change the terms of the contract.
The final decision on unfair contract terms will be a court of law or tribunal, which could be a costly exercise.

The Law excludes certain type of contracts:

  • Contracts entered into before 12 November 2016, unless renewed or varied after this date;
  • Shipping contracts;
  • Constitutions of companies or other kinds of bodies;
  • Certain insurance contracts;
  • Contracts in sectors exempted by the Minister – none currently.

The law excludes certain contract terms such as terms that:

  • deal with the main subject matter of the contract (if you do not have the main subject matter, you will not know what the contract is for)
  • set the upfront price payable (you do need to know the contract price after all);
  • are required or expressly permitted by a law of the Commonwealth, state or a territory (if it has been deemed legal, it is legal).

The change in law requires larger companies to review their standard terms and conditions in areas such as purchase orders, goods and services contracts.

The change gives protection to small business in an area where they really did not have much say in the past.

Protection for Small Business

Small business benefits from new law and will be protected against one-sided, unfair contract terms. This is certainly a great positive move for small business. It certainly helps small business to succeed in building business capability through avoiding one-sided unfair contracts.

For larger companies dealing with small business, now is the time to review your standard form contracts to make sure that post 12 November 2016 the appropriate systems, processes, training and contract templates are in place.

For more detail, it is worthwhile visiting the ACCC’s website.

Post Updated March 2017

About Celia:

Celia Jordaan is a freelance procurement and risk consultant at Ichiban Commercial Solutions, Perth Western Australia. With over 19 years experience, Celia has worked in different countries, locations and cultures in the areas of procurement, supply chain, contract management, law and risk. She has also worked in the area of risk management, contractor management and safety.

Grab the free resources on our website and register for the free monthly newsletter with procurement tips and invitations to future workshops.

About the Author:

Celia Jordaan has more than 30 years international and corporate experience and worked in the areas of procurement, tenders, supply chain, contract management, law and risk. She works with business of all sizes and industries, procurement leaders and teams to develop and implement strategies to boost business performance, make tendering easy and improve bottom line performance.

To learn more about Celia Jordaan, please click here.

For more information on how we can assist your procurement team, your business with tendering or strategic business development and planning, please send us an email today.

Ichiban Commercial Solutions Procurement Advice and Tendering Solutions Celia Jordaan
5 Benefits of Business Planning – Planning your Roadmap to Success

5 Benefits of Business Planning – Planning your Roadmap to Success

Five benefits of business planning include:
1) focused process whereby you determine your business goals and map the journey;
2) business planning determines your actions and the preparations needed to achieve your goals;
3) Stop and plan. – working on your business;
4) opportunity to review different options available
5) Documenting ideas rather than keep it all in your head.

Eight Tips for Successful Brainstorming

Eight Tips for Successful Brainstorming

Eight Tips for Successful Brainstorming : Using Brainstorming to Uncover Innovative Business Solutions Brainstorming is a technique for solving a specific problem through a group effort by gathering ideas contributed by the group.  People often think that...

Contact Ichiban Commercial Solutions Today

Please let us know how we can work with you on improving your tendering, procurement capability and working with you on your business growth.