The Australian Competition and Consumer Commission (ACCC) is urging businesses to closely review the standard form contracts they use when dealing with other businesses.
A new law takes effect on November 12, 2016, after a 12 month transition period that offers small businesses protections against unfair contract terms offered by other (usually larger) firms.
This follows a Commonwealth Government commitment in March 2015 to give Australian small businesses a ‘fair go’ by extending the unfair contract protections currently available to consumers to cover the small business sector.
The March announcement was welcomed by the Australian Chamber of Commerce and Industry, and small business association, COSBOA.
The ACCC, Australian Securities and Investments Commission (ASIC) and state and territory offices of fair trading are responsible for enforcing the law.
“This new law is a positive step for small businesses that are presented with standard form contracts,” ACCC Deputy Chair, Dr Michael Schaper, said.
“For every business that deals with small businesses, now is the time to check that your contracts are compliant.”
The law applies to standard form contracts between businesses where one of the businesses employs less than 20 people and the contract is worth up to $300,000 in a single year or $1 million if the contract runs for more than a year.
Standard form contracts provide little or no opportunity for the responding party to negotiate the terms – they are offered on a ‘take it or leave it’ basis.
“The new protections will help address significant imbalances or disadvantages to small businesses in their dealings with other businesses by allowing the courts to declare void unfair terms within standard form contracts,” Dr Schaper said.