Unfair contract terms

A new regime commenced nationwide on Saturday 12 November 2016 in respect of the regulation of unfair contract terms.

The Federal Government has extended the same unfair contract terms protections currently enjoyed by consumers to small business, effective from Saturday. The changes are contained within the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015.

The changes protect consumers against contract terms that:
• would cause a significant imbalance in their rights and obligations under a contract;
• are not reasonably necessary to protect the trader; and
• would cause detriment (financial or otherwise) to a consumer.

A small business, with less than 20 employees which enters contracts for the supply of financial goods or services which do not exceed $3000,000 (or $1 million for contracts which exceed 12 months, can have a court declare void any terms in a contract which are unfair.

If any term of a contract is varied on or after 12 November 2016, the new protections will apply to that term only and not the rest of the contract.

You must not include terms that allow you to:
• change the contract terms unilaterally;
• avoid liability for contractual breaches or negligence;
• determine if the contract has been breached; and
• impose fees and charges (or penalties) not related to costs incurred.

If any party considers a term to be unfair, they can apply to a court to have a term declared void, for being unfair. That term will then be struck out from the contract, if the contract can continue without it.

All small business owners should review their standard form contracts for compliance with the new regime, if they have not already done so. People should be wary of any contract that is presented to them as non-negotiable.