On 12th November a new law comes into effect which will protect small businesses from unfair terms in standard form contracts. Whether your business is large or small, understanding this new law is important if you plan to enter into a contract on or after this date.

The law, which was passed late last year, sets out examples of terms which may be classed as ‘unfair’ - and if a court or tribunal rules as such, the contract will not be binding.

The new law applies to standard form contracts entered into, or renewed, on or after 12th November 2016. Standard form contracts are contracts which are prepared by one party, which give the other party little or no opportunity to negotiate the terms.

The law applies where:

  • The contract is for the supply of goods or services, or the sale or grant of an interest in land;
  • at least one of the parties is a small business; and
  • the upfront price payable under the contract is no more than $300,000 (or $1 million if the contract is for more than six months).

A contract may be considered ‘unfair’ if it:

  • causes significant imbalance to the parties’ rights and obligations;
  • does not protect the legitimate interests of the party advantaged by the term; or
  • causes financial or other detriment to a small business if it were relied on.

Some examples of terms which may be considered unfair include terms which allow one party, but not the other, to:

  • avoid or limit their obligations;
  • terminate the contract;
  • be penalized for breaching or terminating the contract; or
  • vary the terms of the contract.

We can help you understand the new law around contracts, and how this change might impact you and your business. Contact Hadyn Oriti on (02) 6583 0449 for further information.

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