Evening the playing field

After major findings concerning unfair small business contract terms, the Australian Competition & Consumer Commission has continued the investigative focus, to ensure small business receive appropriate protection.

Section 23 of the Australian Consumer Law (ACL) introduced in November 2016 prohibits unfair contract terms in most small business contracts. The unfair contract terms law applies to business-to-business contracts concerning the supply of goods, services, or sale or grant of interest in land, where:

  • One or more of the parties are a small business and
  • Upfront price payable under the contract is no more than $300,000

The law applies to contracts entered into, renewed or varied on or after 12 November 2016.

The ACCC has, since the introduction of this law, has taken legal action against multiple small businesses with unfair contract terms. Apart from many of the court cases that have resulted in well-known small businesses being ordered to change the terms laid out in their contracts, numerous businesses have adjusted their terms under the guidance of the ACCC to improve their terms and ensure they are remaining compliant, including Uber, Sensis and Fairfax Media.

Occurrences which may deem a term unfair often relate to conditions that allow one party to act in a specific manner but not the other, including:

  • Varying the terms of the contract, such as changing pricing at any time without giving an opportunity to cancel the service.
  • Termination of the contract, without following due process.
  • Failing to fulfil one party’s obligations as laid out in the contract, such as cleaning costs or removal of rubbish costs after a construction job has been completed.
  • Penalties for cancelling or breaching a contract, where the other party enforcing penalties can cancel at any time.

Businesses associated with unfair contract terms can become tainted with a poor reputation, on top of facing serious fines and penalties.

If you feel you have been the victim of an unfair contract, consider the following options available to you:

  • Organise a meeting with the other party, to discuss the contract and implement an amended contract.
  • Contact either the ACCC, your local state or territory consumer protection agency, or the Australian Small Business Ombudsman.
  • Seek legal advice.
Cristy Houghton