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Commercial Law : Unfair Contracts: New Law Impacts on Small Businesses

The ACCC has announced that a new law is being introduced to protect small businesses from unfair contracts. Contracts that are new, renewed or varied from 12 November 2016 and that have been entered into by a small business will be subject to the new laws.

In researching the potentially unfair contracts that small businesses were being subjected to, the ACCC found several unfair clauses including:

  • Allowing the contract provider to unilaterally vary all terms of the contract

  • Broad and unreasonable powers to protect the contract provider against loss and damage at the expense of the small business

  • Unreasonable ability to cancel or end as agreement

The ACCC found that these clauses went beyond the duty to protect the provider business’s legitimate interests and created an imbalance of obligations between the parties at the detriment of the small business.

For a clause in a contract to be unfair under Australian Consumer Law it needs to satisfy the following three conditions:

  • The clause must cause a significant imbalance in the parties’ rights and obligations under the contract

  • It isn’t reasonably necessary to protect the legitimate interests of the party advantaged by the clause

  • It causes detriment (financial or otherwise) to a small business if it were to be applied or relied upon

If a court finds a clause to be unfair, then that clause will be voided and the small business will no longer be required to comply with it.

Before signing off on any new contracts, small business owners are urged to review the terms and conditions. If you have any concerns over these types of contracts or terms, call Damian Bell, of the Commercial Law Team at Creevey Russell Lawyers.

Read more from the ACCC HERE


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