Evening the playing field – Unfair Contract Terms Small Business Update

After major findings regarding unfair contract terms small business, the Australian Competition & Consumer Commission has proceeded with the investigative focus, to make sure small business receives appropriate protection.

Section 23 of the Australian Consumer Law (ACL) introduced in November 2016 prohibits unfair contract terms in the majority of small business contracts. The unfair contract terms law is applicable to business-to-business contracts in relation to the supply of goods, services, or sale or grant of interest in land, where:

  • Upfront price payable under the contract is not in excess of $300,000 and
  • One or more of the entities are a small business

This law is applicable to contracts entered into, varied or renewed on or after 12 November 2016.

The ACCC (Australian Competition & Consumer Commission) has, since the introduction of this law, taken legal action against many small businesses with unfair contract terms.

Apart from many of the court cases that have resulted in well-known small businesses being ordered to change the terms laid out in their contracts, numerous businesses have adjusted their terms under the guidance of the ACCC to improve their terms and ensure they are remaining compliant, including Sensis, Uber and Fairfax Media.

What are Unfair Contract Terms Small Business?

Occurrences which may deem a term unfair often relate to conditions that allow one party to act in a specific manner but not the other, including:

  • Failing to full one party’s obligations as laid out in the contract, such as cleaning costs or removal of rubbish costs after a construction job has been completed.
  • Penalties for cancelling or breaching a contract, where the other party enforcing penalties can cancel at any time.
  • Varying the terms of the contract, such as changing pricing at any time without giving an opportunity to cancel the service.
  • Termination of the contract, without following due process.

Businesses associated with unfair contract terms can become tainted with a poor reputation, on top of facing serious fines and penalties.

If you feel you have been the victim of an unfair contract, consider the following options available to you:

  • Contact either the ACCC, your local state or territory consumer protection agency, or the Australian Small Business Ombudsman.
  • Organise a meeting with the other party, to discuss the contract and implement an amended contract.
  • Seek legal advice.

If you would like to learn more about the rulings regarding unfair contract terms small business, asset protection advice for small businesses or advice specific to your personal circumstances, please don’t hesitate to speak to a small business accountant on 07 3391 1188 or email: info@taggartandpartners.com.au

Updated 25 October 2020

*** This publication is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication. Publication date January 2018

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