Currently, the Australian Consumer Law contains terms that provide consumers with protections against unfair contract terms in standard form contracts
for the supply and sale of goods. In November this year these protections will be extended to small businesses.
A small business is a business with 20 or less employees. This number includes employees working part time and casual staff with regular and systematic
Small business contract
A small business contract is where one party to the contract is classified as a small business for the purposes of this legislation and the upfront contract
prices is no more than:
* $300,000 for contracts of less than 12 months; or
* $1,000,000 for contracts of more than 12 months
The upfront cost in practice will in most cases be the entire price under the contract.
Standard form contract
Some characteristics of a standard form contract are:
* Relative bargaining power or the parties;
* Whether contract was prepared by one party prior to any discussion between the two parties;
* If a party was in effect required to either accept or reject the contract terms;
* Whether a party was given due opportunity to negotiate; and
* Whether terms take into account are specific characteristics of the other party/business.
If a party claims that a contract is a standard form contract the onus is on the other party to prove otherwise.
If a contract term is in a standard form contract is found to be unfair that term will be unenforceable.
These protections will affect small businesses on both sides of the contract as either the buyer or seller of goods or services. It is important that you
have your small business contracts or contracts that you are intending to enter into with a small business reviewed to ensure that they do not fall
foul of the new provisions as these amendments have been enacted largely to counteract the perceived power imbalance of small businesses in the commercial
You can call the AFA Member dedicated ‘legal help desk’ for all IR/HR and legal issues at 1300 AFA LAW (1300 232 529).
Author: Genevieve Lakey