Small business unfair contract laws

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The small business unfair contract terms law will come into effect for Corporations and Sole Traders in most states and territories on 12 November 2016.

There are a number of ways small businesses can seek to resolve their own particular concerns about a potentially unfair term. A small business operator who believes they have found an unfair term in their contract should talk to the contract provider to see if they can resolve the issue by amending or removing the term. Speaking to the other party first could save the small business both time and money – and lead to a better outcome.

Businesses can also contact the ACCC or Consumer Protection in Western Australia. The ACCC can act in cases of widespread small business detriment, or where the business involved is acting in blatant disregard of the law,

Small businesses who find their contract provider unwilling to address their concerns should also consider seeking legal advice. Under the ACL, small businesses have the right to take their own court action or go to a tribunal where they consider a term to be unfair. Disputes over the fairness of a particular term may also be resolved through alternative dispute resolution schemes, industry ombudsmen, or (if applicable) the relevant state small business commissioner’s office.

Ultimately, only a court or tribunal can decide that a term is unfair. If a term is found to be unfair, it will be void – this means it will not be binding on the parties. The rest of the contract will continue to bind the parties to the extent it is capable of operating without the unfair term.

If a court makes a determination that a term is unfair and a party subsequently seeks to apply or rely upon the unfair term, it is a contravention of the Australian Consumer Law (or the ASIC Act), and the court may grant one of the following remedies:

  • an injunction preventing the party from acting upon the term
  • an order to provide redress to non-party small businesses
  • any other orders the court thinks appropriate.

More information is available from our webpage Unfair contract terms and publications.

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