UPDATE: The information in this article has been superseded by amendments to the legislation since publication. You can find our more recent article on this subject here. 

States and territories across Australia have confirmed their support for legislation to extend unfair contract protections for small businesses.  This support was garnered after a 10 week consultation period in mid-2014 and has resulted in the publication of a draft bill, released by the Government on 28 April 2015.

The proposed changes are designed to protect small businesses subject to “consumer like” contracts from the unreasonable and unfair bargaining power of large businesses.  When announcing the new changes, the Honorary Bruce Bilson MP, Minister for Small Business, noted:

Like consumers, small businesses often lack the time, legal expertise or bargaining power and have been locked into ‘take it or leave it’ contracts, with little scope to negotiate just and fair terms.

Small Business = <20 staff + transaction < $100K or $250K over 2+years

The protections give courts the power to declare unfair contract terms void and may apply when:

• At least one party to the contract has less than 20 employees; and
• The transaction is under $100,000; or
• The transaction is a multi-year contract with a value less than $250,000.

The Government has also pledged $1.4 million to the Australian Competitions and Consumer Commission to oversee compliance with the new rules.  ACCC enforcement should discourage big business from including unfair contract terms and will provide a remedy to small businesses that have unfair contracts. 

The legislation is expected to take effect in early 2016.

You can read a copy of the Draft Bill at the Australian Treasury website:  http://www.treasury.gov.au/ConsultationsandReviews/Consultations/2015/Extending-unfair-contract-term-protections-to-small-businesses

For more information on the rights of your small business, contact Peter McNamara at peter.mcnamara@cml.com.au.