Unfair Contract Term Protections: It’s Time to Review your Standard Form Contracts

3 December, 2016

As of 12 November 2016, the existing unfair contract term protections for consumers have applied to standard form small business contracts. All businesses are expected to review their standard form small business contracts to ensure compliance with the new protections, and to remove or alter any contract terms which may be considered “unfair”.

What contracts are covered?

The unfair contract term protections apply to standard form small business contracts only. A standard form small business contract is entered into when at least one party to the contract employs fewer than 20 persons, and either:

  1. The upfront price payable under the contract does not exceed $300,000.00; or
  2. The contract has a duration of more than twelve months (12), and the amount payable does not exceed $1,000,000.00.

A contract will be deemed to be “standard form” when it is prepared by one party, and is not subject to negotiation.

What is considered “unfair”?

Generally a term will be considered unfair if the term would cause significant imbalance in the parties’ rights and obligations arising under the contract. That is, if the term significantly burdens or benefits one party. Alternatively, a term may be considered unfair if it is not reasonably necessary to protect the legitimate interests of a party.

Terms must also be transparent, and expressed in clear and plain language. Examples of terms that are not transparent include terms contained in fine print, or terms that use overly technical or complex language.

What do you need to do?

At Access Law Group, we recognise the difficulties faced by small businesses in dealing with large organisations. Often, contracts are offered on a ‘take it or leave it’ basis with no room for negotiation, leaving small business with the short end of the stick. If you believe that you are a party to a contract that contains unfair terms, contact Access Law Group for assistance.

Access Law Group also regularly deal with large organisations who seek to enforce terms and conditions in their contracts, yet face difficulties through the litigation process. If you are a large organisation, now is the time to review your standard form contracts to avoid this problem.

If you would like to discuss how the new law may affect you as a small business, or as a larger organisation, please contact James Welch, or our team at Access Law Group in order to arrange a free 30 minute consultation.