Under changes to the Federal Government’s Competition and Consumer Act, small business is set to receive the same protection against unfair contract terms that is currently enjoyed by consumers. Although the laws have not yet been passed, they formed part of the announcement of the Federal Budget and are expected to make their way through parliament in coming months. If they are passed, it will be a real windfall for small business because they will no longer be exposed to the corporate might of the multi nationals and larger companies when entering into standard form contracts.
Under the current legislation (which is planned to be extended to benefit small businesses) when contracts and trading terms are presented to them by big companies they contain terms which are considered to be unfair, as those terms will become void.
Terms that are considered to be unfair include those where the terms are not reasonably necessary to protect legitimate business interests, cause a significant imbalance between the rights of the parties or which would cause an unfair financial or non financial detriment to the consumer if the big business attempted to enforce them. For example, a term in the fine print of a contract with a telecommunications company which reported to charge a sizeable “disconnection fee”, if the consumer changed providers within a certain period of time would potentially be viewed as a penalty and therefore be unfair and un-enforceable. Now, the same protections are planned to be extended to small business who may not be, strictly speaking, “consumers” but until now, unable to muster the economic clout to renegotiate terms of standard contracts.
It is anticipated that the changes will only apply to contracts entered into after the new legislation commences so if you are in small business, you will no doubt be hoping that that happens sooner rather than later!
Schultz Toomey O’Brien
Ph: (07) 5413 8900
Fax: (07) 5413 8958