Changes to standard form contracts which come into effect next month offer small business owners better bargaining power to forge a fair deal – if you know what to do.
Small businesses will be in a better position from next month, when an amendment to the Australian Consumer Law (ACL) which will protect small businesses from unfair standard-form contracts comes into effect on November 12.
Defining standard-form contracts
The amendment will offer small businesses the same safeguards as consumers, and apply to standard-form contracts where one party has drafted a pre-prepared set of terms that are not generally negotiated, for example in the repeated sale of goods. Contracts where parties have made one-off or special deals will not be affected.
“The rationale for extending these ACL protections to small business contracts are to deal with a bargaining imbalance,” says Hayden Fox, Head of Litigation and Dispute Resolution at Australian Business Lawyers & Advisors.
Businesses in same boat as consumers
“The changes provide a recognition that small business entities are, in many ways, in the same boat as consumers and don’t have a realistic opportunity to resist certain types of unfair provisions being forced on them.”
Lookout for dodgy terms
Businesses creating or accepting these kinds of contracts should be on the lookout for “terms which have a lopsided feel about them, with regards to the commercial give-and-take that you expect to see in any contract”, Fox advises.
These might include provisions that give an advantage or inflict a penalty on the other party which can’t be justified by the commercial dynamics, for example, where a customer cancels a contract early, and a term seeks to impose an additional cancellation charge after the fact.
Measure each questionable term
When analysing the composition of standard form agreements, Fox says the best starting point is to carefully measure each questionable term against the requirements of the new provision.
Be aware of industries under scrutiny
The Australian Competition and Consumer Commission has indicated that it will be watching a number of industries, including retail leasing, advertising, telecommunications and IT services, closely once the law comes into effect.
Beyond these practical tips, Fox advises that Chamber members access the commercial expertise of Australian Business Lawyers & Advisors at a discounted rate. Call the team on 1300 565 846 or visit australianbusiness.com.au/lawyers/home