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Unfair terms protections for small business passed through parliament Are you ready? - 22 October 2015

The Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 was passed through parliament yesterday. The Bill, yet to receive Royal Assent, will extend the unfair terms protections for consumers in the Competition and Consumer Act 2010 and Australian Securities and Investments Commission Act 2001 to those businesses with less than 20 employees.  The protections relate to the terms of standard form contracts valued at less than a prescribed threshold.

For details on how these protections will apply to standard form small business contracts, see our earlier article.

Amendments

Prior to passing through parliament, proposed amendments by the Australian Greens to increase the prescribed thresholds for a standard form contract to come within the definition of a “small business contract” were adopted.  In accordance with these amendments, a contract will now be a small business contract if:

  • At the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and
  • Either of the following applies:
    • The upfront price payable under the contract does not exceed $300,000 – previously proposed to be $100,000; and
    • The contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000 – previously proposed to be $250,000.

The proposed six month transitional period for the legislation was also extended to 12 months prior to passing through parliament.

What now?

Once the Bill receives Royal Assent, there will be a 12 month transitional period for traders dealing with small-businesses to review their standard term ‘take it or leave it’ contracts so as to ensure they do not fall foul of the new small business protections.

Only time will tell the extent of the impact of these reforms. In the meantime, traders should review the terms of their standard form contracts to reduce the risk of uncertainty of terms that may be considered unfair and potential for dispute once the new laws come into force.  

For more information or discussion, please contact HopgoodGanim Lawyers' Litigation & Dispute Resolution or Private Enterprise teams.  

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