ACCC emphasises changes to contracts

The Australian Competition and Consumer Commission is concerned that many sectors remain unprepared for changes that will take effect in November, when existing unfair contract provisions for consumers are extended to include small businesses.

According to the ACCC, small businesses enter into an average of eight standard contracts a year. With more than two million small businesses in Australia, the commission anticipates this change will potentially affect millions of standard-form contracts.

The new law, which is aimed at protecting small businesses from unfair terms in business-to-business standard-form contracts, will apply from November 12. Currently, many small businesses entering into contracts with larger businesses have no option but to accept all the terms of the standard-form contract that they are given.

Standard-form contracts provide little or no opportunity for the responding party to negotiate the terms – they are offered on a ‘take-it-or-leave-it’ basis. Some examples of unfair contract terms include those that enable one party (but not another) to terminate the contract, or that penalise one party (but not the other) for breaching or terminating the contract. Under this new law, the courts will be able to strike out any unfair contract terms.

“The ACCC has engaged with many businesses during the transition period,” ACCC Deputy Chair Dr Michael Schaper said. “I urge all businesses that issue standard-form contracts to undertake a review of their terms in the lead-up to November 12 to ensure that they are compliant with the new laws.

“Almost two-thirds of small businesses have claimed to have experienced unfairness in the contract terms and conditions that they have signed up for and almost half report experiencing some harm as a result.”

Dr Schaper said efforts at education and engagement had focused on a number of sectors, including franchising, retail leasing and independent contracting.

“The prevalence of standard-form contracts in these areas means that these businesses should be taking full advantage of the transition period to understand their obligations and review their contracts” he said. “Our engagement to date suggests that there is still more to do before November 12.”

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