Get ready for changes to unfair contract terms law

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The ACCC is warning businesses to be prepared for the new law relating to standard form contracts.

On 12 November, existing unfair contract provisions for consumers will be extended to include small businesses. The ACCC says the new law aims to protect small businesses from unfair terms in business-to-business standard form contracts.

“Currently, many small businesses entering into contracts with larger businesses have no option but to accept all the terms of the standard form contract that they are given,” the ACCC said in a statement.

“Under this new law, the courts will be able to strike out any unfair contract terms.”

According to the ACCC, small businesses enter into an average of eight standard contracts a year, and with more than two million small businesses in Australia, the new changes will potentially affect millions of standard form contracts.

In particular, standard form contracts are prevalent in sectors such as franchising, retail leasing and independent contracting.

I urge all businesses that issue standard form contracts to undertake a review of their terms in the lead up to 12 November to ensure that they are compliant with the new laws,” says ACCC deputy chair, Dr Michael Schaper.

The ACCC notes the law will apply to a standard form contract entered into or renewed on or after 12 November 2016. If a contract is varied on or after 12 November 2016, the law will apply to the varied terms.

“The law sets out examples of contract terms that may be unfair, including:

  • terms that enable one party (but not another) to avoid or limit their obligations under the contract
  • terms that enable one party (but not another) to terminate the contract
  • terms that penalise one party (but not another) for breaching or terminating the contract
  • terms that enable one party (but not another) to vary the terms of the contract.”

“All businesses should make an effort to understand how they will be affected by the law and whether it covers any deals they are engaged in,” adds Schaper.

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