By Helen Carter
A new law will protect small businesses from unfair terms in standard form contracts from 12 November 2016.
A standard form contract is a contract between two parties, in which the terms and conditions of the contract are set by one of the parties, and the other has little or no ability to negotiate more favourable terms. It is common for businesses to offer employees these contracts. They are basically the same or a similar contract being offered to all employees.
The Australian Competition and Consumer Commission’s Small Business team says that if you are a small business and enter into a contract after 12 November in which you have little or no ability to negotiate, this law will protect you from unfair terms.
‘If you are about to enter into or sign a new contract, consider whether you can wait until after this date to gain this protection,’ the ACCC Small Business team says.
The law will apply to a standard form contract entered into or renewed on or after 12 November where it is for the supply of goods or services or the sale or grant of an interest in land; where at least one of the parties is a small business employing fewer than 20 people, including casual employees; or where the up-front price payable under the contract is no more than $300,000 or $1 million if the contract is for more than 12 months.
The new law gives examples of terms which may be unfair. These include terms that enable one party but not another to avoid or limit their obligations under the contract or to terminate the contract; terms which penalise one party but not another for breaching or terminating the contract; and terms that enable one but not the other to vary the terms of the contract.
Information is available online on how a court determines whether a term is unfair, with examples of unfair terms.
Although the ACCC will be able to take enforcement action against businesses that offer small business standard form contracts that contain unfair contract terms, only a court or tribunal can decide that a term is unfair.
If a court or tribunal finds that a term is unfair, the term is void and is not binding on the parties, but the rest of the contract continues to be binding.
Some contracts will not be covered by the new law, including contracts entered into before 12 November 2016 unless renewed on or after this date.
For information about the new law visit the ACCC website.
The ACCC’s small business unfair contract terms industry review report, available on the ACCC website on 10 November, may also help optometrists gain an understanding of common potentially unfair contract terms.