Small Business Alert – Are your standard contract terms unfair?

Posted on March 29, 2016

If you are a small business, or you deal with small businesses, you need to be ready for some major changes later this year, which could affect the validity of your standard form contracts.

From 12 November 2016, consumer legislation will extend protection against unfair contract terms to certain contracts to which at least one party is a small business. Under the new law, if a court decides that your standard contract contains an unfair term, it may declare the term void. More alarmingly, if your contract cannot operate without that term, your entire contract can be declared void.

What you need to do to prepare for the changes

If your business employs, or you supply goods or services to other businesses that employ, fewer than 20 (non-casual) employees, you need to review your existing contracts to:

determine whether they are ‘standard form contracts’, and, if so, whether they fall within the scope of the new legislation (this will depend on whether the price payable under the contract is greater than $300,000 or, if the contract is for a term of more than 12 months, $1 million); and identify any terms in your contracts which a court might consider to be unfair.
We can help you to avoid the risk that your contracts will be challenged.

If you come and see us, we will explain whether the unfair contract provisions will apply to your standard terms of trade, supply or distribution agreements, and if they do, help you to identify any of your terms which may be declared unfair and limit your exposure to legal risk. Please contact Brendan Reidy at [email protected] or Noel McNicol Smith at [email protected] or on 9853 0311.

This bulletin is provided for general information purposes only, and should not be relied upon as a substitute for legal advice.

The information in this bulletin is current as at the date of publication

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