Touchpoint Legal Contract Law

Corporate countdown to compliance – new unfair contract laws

Do your contracts comply? – changes to unfair contract laws

Are you a medium to large enterprise that sells to small businesses?  On 12 November 2016, amended laws will commence to protect small businesses from unfair contract terms in standard form contracts (Competition and Consumer Act 2010 (Cth)).  The objective of the new laws is to address any imbalance in bargaining power when you negotiate contracts with small businesses on a ‘take it or leave it’ basis.

Does your business offer standard form contracts to small businesses?

Generally, a standard form contract is one that has been prepared by you that is not negotiable. If the other party wishes to deal with you, then they must deal with you on a ‘take it or leave it’ Touchpoint Legal Unfair Contract Termsbasis. This can apply when you request your customer to click on an ‘I agree’ button on your webpage,  you request verbal agreement over the telephone or when you request your customer to sign a contract.

The laws already apply to consumer contracts for goods or services (a consumer is an individual who acquires goods or services for personal or domestic use). After November 12, it will apply to standard form contracts with ‘small businesses’ – that is, businesses that employ less than 20 people, on a regular basis.

Which of your contracts may be affected? 

The laws will affect standard form contracts entered into, varied or renewed where the contract is:

  1. for the supply of goods or services or the sale or grant of an interest in land;
  2. at least one of the parties is a small business; and
  3. the upfront price payable under the contract is no more than $300,000 or $1,000,000 if the contract is for longer than 12 months.

If you offer standard form contracts that fit within the above criteria, then your contracts need to be reviewed for compliance with the unfair contracts laws. Touchpoint Legal can help you to assess your compliance. Click here to arrange a free consultation.

Touchpoint Legal Unfair Contract TermsWhat are ‘unfair’ contract terms? 

A contract term may be considered ‘unfair’ if it:

  1. would cause a significant imbalance in parties rights and obligations;
  2. is advantageous to you but is not reasonably necessary to protect your legitimate interests;
  3. would cause detriment to the other party if it were applied or relied on by them.

Some examples of terms that may be considered unfair are, if the term:

  1. allows for one party to vary the contract without the agreement of the other party;
  2. limits one party’s right to sue the other party;
  3. allows one party to terminate without cause;
  4. limits the liability of one party.

These are only a few examples of what may constitute an ‘unfair’ contract term.

Consequences for non-compliance with unfair contract terms 

If it is found that a contract term is unfair, then you will not be able to enforce it against the other party. It will be struck out of the contract. This can be devastating to your business if the unfair contract term affects many or all of your customer contracts. The solution is to create contract terms that are considered at law to be fair and therefore enforceable. This will protect your business interests and keep your customers (and the ACCC) happy.

What you should do next?

If you are unsure about whether your contracts comply, talk to Touchpoint Legal about reviewing your contracts for compliance. We’ll help you to put in place enforceable contract terms that protect your business interests and keep your customers happy! Click here to arrange your free consultation or talk to us about one of our service packages. 

This blog is for information purposes only, does not constitute legal advice and should not be relied upon as such. If you require legal advice please contact us or another registered legal practitioner. Limited liability by a scheme approved under Professional Standards Legislation. Solicitors employed by Touchpoint Legal Pty Ltd (ACN 611 758 279) t/as Touchpoint Legal are members of the Scheme. 

About The Author

Angela Stackelbeck

Angela Stackelbeck is a Legal Director at Touchpoint Legal. She has practised law in Sydney in large corporates and private practice, for over 20 years. Angela's broad experience allows her to uniquely offer the dual benefit of practical legal expertise gained in private practice and commercial pragmatism learned from the in-house environment. You can contact Angela at angela@touchpointlegal.com.au or on 02 8005 0692 or 0404 872 644.