Unfair terms for standard form contracts are now in force

Laura Bazouni

On 12 November, 2016 new legislation came into effect which aims to protect small businesses from unfair terms in business-to-business standard form contracts.

This new legislation extends the operation of the existing unfair contracts provisions to include small businesses. The new provisions allow the courts to strike out any terms in contracts that are held to be unfair.

The legislation applies to standard form contracts as follows:

The effect of the new legislation is to protect business that are in a weaker bargaining position and who often find themselves in a ‘take it or leave it’ situation. Some examples of unfair contract terms are set out in the legislation and they include:

Breach of these provisions could not only land you in Court as a Defendant but you could also be on the receiving end of an ACCC enquiry into your business practice. If a Court finds that a particular term in a contract is unfair then that term will be held to be void.  

In a recent case the Federal Court of Australia declared that an internet service provider’s standard terms and conditions were unfair.  Those terms had the effect of:

A voided term in a Contract has the potential to substantially alter the contractual relationship between parties as the rest of the contract will continue to bind the parties to the extent it is capable of operating without the unfair term. Some other orders that can be enforced against an offending party are an award for damages as well as an injunction in serious cases.

If you would like to receive our regular legal Updates, please subscribe here.  If you haven’t reviewed your contracts in a while or you feel a term in a contract you are a party to is unfair then please contact our ParramattaNorwest or Penrith office: