Is your Standard Form Contract Bullet Proof from Unfair Terms?
Are you a franchisor? …or a financial services provider with authorised representatives? …or a credit provider? …or a service provider? Do you have a standard form contract that you wheel out when you take on board a new business partner or customer?
A change is nigh. On 12th November 2016, new laws will commence to protect small businesses from unfair terms in standard form contracts. This extends the protections which currently cover consumers.
If your new business partner or customer employs less than 20 people, and the up-front payment under the contract is less than $300,000, or the payments to you under the contract over 12 months are less than $1 million, your standard form contract (or a variation of an existing contract) entered into after that date must comply with the new laws.
Contracts which are pre-prepared by one party and put to the other on a “take it or leave it” basis, where there is no reasonable opportunity to negotiate the terms, will be vulnerable if the contract contains unfair terms. Unfair terms may include:
- terms which allow you to limit or avoid your obligations, but do not make the same provision for the other party;
- terms which allow you to terminate the contract, but do not make the same provision for the other party;
- terms which allow you to vary the contract, but do not make the same provision for the other party;
- terms which unreasonably penalise the other party for breach or termination of the contract.
- Your unfair contract could be challenged in a court or tribunal, and any unfair provisions may be held to be not binding – and you may have a costs order made against you. You might even attract the scrutiny of the ACCC.
Our commercial lawyers can help you ensure that those contracts which you have been using are refreshed so that you will not breach the new laws, or that any new contracts comply with the legislation and help keep you on the right side if a dispute arises.
Author: Tim Dixon (Special Counsel)