Small business unfair contract terms law passed through Parliament


In June 2015, we reported that the Commonwealth Government had released draft legislation which sought to extend consumer protections relating to unfair contract terms to protect small business. In this article, Richard Suters, Principal of our corporate and commercial team, provides our comments on the latest developments.

On 20 October 2015, the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 passed through both houses of parliament. It is expected to receive royal assent in the near future.

Revised definition of a "small business contract"?

In parliament the Australian Greens were successful in seeking to broaden the meaning of a “small business contract”. It appears that the new provisions will now apply where at the time the contract is entered into, at least one party to the contract employs fewer than 20 people; and if either of the following applies:

  1. the ‘upfront’ price payable’ does not exceed $300,000 (excluding any interest payable); or
  2. the contract has a duration of more than 12 months and the ‘upfront’ price payable’ does not exceed $1,000,000 (previously proposed to be $250,000 in the exposure draft).
What to do

The proposed transition period has been extended from 6 to 12 months, to allow businesses more time to review their ‘standard form contracts’.

Given the broadening of the meaning of “small business contracts” it is now more important than before that businesses review their ‘standard form contracts’ to ensure that they will not offend the ‘unfairness’ concept under the Australian Consumer Law.

This article is not legal advice.  It is intended to provide commentary and general information only.  Access to this article does not entitle you to rely on it as legal advice.  You should obtain formal legal advice specific to your own situation.  Please contact us if you require advice on matters covered by this article.