New unfair contract terms law for small business comes in to effect 12th November 2016. This new law provides protection for small business for unfair terms in standard form contracts.

1. BE PREPARED FOR THE
NEW UNFAIR CONTRACT TERMS LAW
PROTECTION EXTENDED TO SMALL
BUSINESS

2. New unfair contract terms law for small business comes in to effect 12th
November 2016. This new law provides protection for small business for
unfair terms in standard form contracts.
At least one party to the contract must be a ‘small business’ (defined as a
business that employees fewer than 20 people at the time the contract is
entered into).
Applicable to Small Business Standard Form
Contracts

3. Unfair Contract Terms Law Applies To
It applies to small business ‘standard form’ contracts for a ‘financial product,
or the supply or possible supply of financial services’ which do not exceed
$200,000 – or $1million if the contract is for more than 12 months. Examples
of such are contracts for business loans, credit cards and client or broker
agreements.
Unfair Contract Terms Law Doesn’t Apply To
The unfair contract terms law does not apply to insurance contracts regulated
under the Insurance Contracts Act 1984 and the constitutions of companies,
managed investment schemes or other kinds of bodies. The Minister has not
currently exempted any sectors from the new laws.
Unfair Contract Terms Law

4. A term in a standard form small business contract is 'unfair' if it would cause
a significant imbalance in the parties’ rights and obligations arising under the
contract and the term:
• is not reasonably necessary to protect the legitimate interests of the party
that would benefit from its inclusion;
• would cause financial or other detriment (e.g. delay) to a small business if
it were to be applied or relied on.
What is Deemed an ‘Unfair’ Term

5. A term in a standard form small business contract is 'unfair' if it would cause
a significant imbalance in the parties’ rights and obligations arising under the
contract and the term:
• is not reasonably necessary to protect the legitimate interests of the party
that would benefit from its inclusion;
• would cause financial or other detriment (e.g. delay) to a small business if
it were to be applied or relied on.
What is a ‘Transparent’ Term

6. ASIC expects businesses to review their standard form small business
contracts to remove any terms that could be considered to be unfair to
ensure compliance before the 12th November 2016.
If businesses using contract terms of potential concern are uncooperative, or
refuse to make recommended changes, ASIC may consider enforcement
action.
Important to Review Existing Contracts

7. Available on the ACCC Website:
Quick Links
What is a small business contract?
What is a standard form contract?
Which contracts are covered?
Which contracts and terms are excluded?
When is a term of a small business contract unfair?
What happens if a court finds a term is unfair?
What can I do if I think a term in my contract is unfair?
What does ASIC expect businesses to do between now and 12 November
2016?
Further Information

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