New small business contract rules in Australia

The Australian government has passed legislation that extends protection against unfair terms in standard form contracts to Australian small businesses, notes the latest edition of TT Talk, from TT Club.

The extension of the applicability of the Competition and Consumer Act 2010 protects small businesses (employs fewer than 20 people) against inequities that stem from from unfair contract terms being unilaterally imposed in standard form contracts. The legislation applies where the goods or services have been provided within Australia.

1. The value of the contract at the time it is entered into must not exceed A$300,000 (where the contract is for a period of less than 12 months) or A$1m (where the contract exceeds 12 months).

Carriage of goods by sea is excluded, but a freight forwarder’s t&c’s, could fall under the provisions of the law, which state that a term of a contract could be considered unfair if it: (a) Would cause a significant imbalance in the rights of the parties and their obligations; (b) is not reasonably necessary to protect the legitimate interests of the party benefiting from the term; (c) Would cause financial or other detriment if it were to be applied or relied upon.

A party asserting a contract term is unfair may either make an application to an Australian court or an agency such as the Australian Competition and Consumer Commission (ACCC) to lodge a complaint. The ACCC, with the objective of creating fair and transparent markets, is more likely to take action when it will address a wider public interest.

Should a contract term be declared unfair, a court may order that the term is void, leaving the balance of the contract enforceable. Alternatively, a court may refuse to enforce a contract or direct a refund or the re-performance of services.

The legislation will apply to contracts entered into, renewed or varied after 12 November 2016.

TT Talk said that “at this stage, until there has been judicial consideration of this legislation, it is uncertain whether standard terms and conditions containing typical exclusions for damage incurred during transport, reliance on package limitations and time limitations for notifying claims will be considered unfair. Such provisions are typical in the transport and logistics sector, and stakeholders need to be alert to the potential impact of this new legislation.”

Alexis Cahalan of TM Law Australia contributed to the analysis.