Unfair contract laws to commence on 12 November 2016


In June and November last year, our Corporate and Commercial team wrote about legislation which will come into force on 12 November 2016, which extends unfair contract terms protections to standard form contracts involving small businesses. In this article, Richard Suters, Principal, considers the impact of the new legislation on small businesses.

When does the law take effect?

These laws come into force on 12 November 2016, and will apply to contracts entered into, or varied, on or after this date.

Do I need to do anything?

If you are a small business, or you contract with small businesses, you should undertake a review of your standard form contracts (e.g. standard terms and conditions) as soon as possible to make sure they do not contain “unfair” terms. While the new laws are yet to be tested, and each term will need to be considered in its relevant context, some examples of potentially unfair terms may include:

  • automatic renewal – a term that has excessively long renewal periods or that applies excessive fees where a party does not want to proceed with the renewal;
  • cancellation fees – a term that imposes unfair cancellation fees;
  • termination – a term that unfairly restricts a party’s ability to terminate or allows a party to terminate unilaterally; or
  • variation – a term that allows a party to unilaterally or retrospectively vary the terms of the agreement.

If you identify a term which may be unfair, and believe that this term is legitimate and necessary, you should record the reasons that you hold this view within the standard terms. This may help protect you in the case a claim is brought against you in the future.

If you are a small business that signs standard terms (for example, a franchisee who signs a standard franchise agreement), you should become familiar with your rights under these new laws, as they can help you protect your business interests and negotiate better commercial outcomes in your dealings with other businesses.

As the Australian Competition and Consumer Commission (ACCC) has already given a 12-month transition period, to allow businesses to comply with these laws, we anticipate the ACCC will be proactive in enforcing these laws from 12 November.

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.