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Unfair contract terms: new rights for Small Business

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Small Businesses will soon have the right to request removal of unfair terms within new standard form contracts (from 12 November 2016). This will provide small business with protections afforded to consumers in the Australian Consumer Laws adopted in 2010 (the ACL).

New Amendments

The new amendments to the ACL provide a clear path to having unfair terms in eligible contracts removed. By piggy backing on the consumer rights, protections against unfair contract terms is will become available for Small Business.

Examples of potentially unfair contract terms include:

a. one-sided avoidance or limitation of the performance of the contract; or

b. permitting termination, variation, renewal or refusal to renew, or otherwise limiting the rights of one party, but not the other.

Application of laws

The amendments relate to two business related laws, the Australian Securities Investment Commission Act 2001 (ASIC Act) for financial services, and the ACL portions of the Competition and Consumer Act 2010 (the CCA) for the supply of goods and services.

Changes to the ASIC Act apply only to standard form contracts for financial products or financial services. Changes to the ACL (within the CCA) apply to standard form contracts for the supply of goods or services.

Requests for the removal of unfair terms under the ASIC Act or the ALC
may be brought by either a Small Business which is party to the contract, or
the relevant regulatory body (ACCC/ASIC).

Businesses which include clauses that may be considered ‘unfair’ in their standard form contracts offered to Small Businesses have until 12 November 2016 to amend those clauses for new contracts. The protections do not apply retrospectively, however where a contract is renewed or the potentially unfair term is varied after that laws come into effect, the protections would apply.

The protections are aimed to apply where, at the time of entering into the contract, at least one party falls within the definition of a Small Business being where that party employees fewer than 20 persons, and either:

a. the upfront price under the contract does not exceed $100,000; or

b. the contract has a duration of more than 12 months and the upfront price is under $250,000.

How can we help?

ARETE Group’s commercial practice has extensive experience in drafting and negotiating goods and services agreements. Our contract drafting and negotiation services allow clients to understand what terms in current or proposed standard form contracts may be deemed an unfair contract term (and to make amendments accordingly). With a view towards the November 2016 compliance date, we recommend relevant standard form contracts be reviewed for compliance as soon as possible.

If we can assist in reviewing / drafting your contracts to ensure compliance with the unfair contract term laws, or if we can assist in negotiating contract provisions, call us on 6162 1639 , visit us at www.aretegroup.com.au , or email our Director, Shaun Creighton, at [email protected]

shaun-creighton

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For further information or if we can assist, visit our website at www.aretegroup.com.au or email [email protected] for an obligation free assessment of your legal issues

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