As 12 November 2016, a new law will protect small businesses from unfair terms in standard form contracts. As Perth's experienced business contract lawyers, Havilah Legal outline what small businesses need to know regarding the amendments in this helpful presentation.

1. Small Businesses and
Amendments to Australian
Consumer Law
Presented by Perth’s experienced Business Contract Lawyers

2. AMENDMENTS TO AUSTRALIAN CONSUMER LAW
From 12 November 2016, a new law will protect small businesses from unfair
terms in standard form contracts.
Essentially the new law amends the Competition and Consumer Act 2010, and it
is important for businesses to understand how it will impact the way in which
they enter into contracts.
Throughout this presentation we will uncover the details your business needs to
know, including:
- What type of contracts are affected
- What types of terms may be unfair
- Effect of having an unfair contract term
- What businesses should be doing

3. What type of
contracts are
affected?
The law will apply to a standard form contract
entered into or renewed on or after 12
November 2016, where:
- it 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 (i.e. it employs less than 20
people, including casual employees
employed on a regular basis); and
- either the upfront price payable under the
contract is no more than $300,000 or $1
million if the contract is for more than 12
months.

4. What type of contracts are affected? (Continued)
A standard form contract is one that has been prepared by one party to the contract and where the other party
has little or no opportunity to negotiate the terms – that is, it is offered on a ‘take it or leave it’ basis. The law
will apply even where both parties to a contract are small businesses. It is likely to affect a range of contracts,
including:
- contracts for supply of services
including IT services, advertising
services and banking services;
- purchase of motor vehicles;
- equipment finance;
- loans to small businesses;
- technology licences;
- contracts between retailers and
suppliers;
- contracts for the transport of goods by
land;
- storage of goods;
- building contracts; and
- contracts for online purchases.

5. What types of
terms may be
unfair?
The law sets out examples of terms that may be
unfair, including terms that:
- enable one party (but not another) to
avoid or limit its obligations under the
contract;
- enable one party (but not another) to
terminate the contract;
- penalise one party (but not another) for
breaching or terminating the contract; and
- enable one party (but not another) to vary
the terms of the contract.

6. What types of terms may be unfair? (Continued)
Ultimately, only a court has the discretion to decide that a term is unfair.
To be ‘unfair’, a term must:
- cause a significant imbalance in the parties’ rights and obligations;
- not be reasonably necessary to protect the legitimate interests of the party advantaged
by the term; and cause financial or
- cause financial or other detriment (such as delay) to a small business if it was relied on.

7. Effect of having an
unfair contract
term
If a court finds that a term is ‘unfair’, the term
will be void – this means it is not binding on the
parties.
The rest of the contract will continue to bind the
parties to the extent it is capable of
implementation without the unfair term.

8. Effect of having an unfair contract term (Continued)
The court has the absolute discretion to determine whether or not a contract is a standard form contract.
However, in making such a decision the court must consider:
- the relative bargaining power of the parties;
- whether or not the contract was prepared by one party prior to any discussion concerning the transaction
between the parties;
- whether one party was, practically, required to either accept or reject the contract in its present state (was
it a “take it or leave it” situation); and
- whether the customer was given an effective opportunity to negotiate the terms of the contract (with the
exception of terms relating to price).

9. Effect of having an unfair contract term (Continued)
It is not an offence to include an unfair term in a small business contract and there are no penalties for doing so.
However, if a person makes an attempt to enforce a provision of a contract that is declared unfair then remedies
may apply, including compensation to the other party.
A small business, the Australian Competition and Consumer Commission (ACCC), a state or territory regulator
or the Australian Securities and Investment Commission (ASIC) may apply to the court to declare that a term
of a standard form small business contract is unfair.

10. What should
businesses be
doing?
All businesses should consider reviewing their
standard form contracts (whether these are
contracts with suppliers, customers or
independent contractors) to determine the
circumstances in which they may be used and
whether they will be impacted by the
amendments to Australian Consumer Law.
If they are impacted, they may need to be
amended. Small businesses should also consider
their approach to negotiating standard form
contracts offered by other parties in the course
of business.

11. Disclaimer
The material in this article is of a general nature and intended for information only. It
is not intended to be comprehensive and does not constitute legal advice. Any person
with a specific legal issue should consult a lawyer.
Presented by Perth’s experienced Business Contract Lawyers