Small business unfair contract laws

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Small businesses have similar protections as consumers when it comes to unfair contract terms. A small business operator who believes they have an unfair term in their contract should talk to the provider to see if they can resolve the issue. Speaking to the other party first could save the small business both time and money – and lead to a better outcome.

The law applies to standard form contracts entered into or renewed, where:

  • it is for the supply of goods or services or the sale or grant of interest in land;
  • at least one of the parties is a small business; and
  • the upfront price payable under the contract is no more than $300,000 or $1 million if the contract is for more than 12 months.

A standard form contract is one that is prepared by one party to the contract and where the other party has little or no opportunity to negotiate terms, a ‘take it or leave it’ scenario.

If you think a contract term is unfair, ask the other party to amend it or remove it. If they won’t, contact the Small Business Development Corporation business advisory service for help or seek legal advice. You can also visit the ACCC’s small business website or contact their helpline on 1300 302 021.

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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