In case you missed it, from November 9, 2023, the Australian Consumer Law went through some significant updates, and I’m here to break it down for you. It’s crucial to understand how these changes could impact your small business contracts.

Recapping the Australian Consumer Law changes

So, what’s all the buzz about? On November 9, 2023, the Australian Consumer Law underwent a significant transformation. Now, the courts have the power to slap hefty penalties on anyone trying to sneak unfair terms into standard-form contracts. This is a game-changer because, in the past, the courts could only shake their heads disapprovingly at such terms and not much else. It’s a clear signal that these changes are no joke.

The ACCC can’t stress enough how vital these changes are. They’re all about protecting the interests of everyday consumers and small business owners who often find themselves in those ‘take it or leave it’ situations when dealing with contracts that tend to favour the big guys.

Standard Form Contracts: Finding the Balance

You’ve probably come across standard-form contracts in your business dealings. They’re pretty common, especially when there’s a high volume of transactions, set on ‘rinse and repeat’ with no feedback from customers. Often, these contracts have been one-sided, favouring the party that drafted them. Well, the good news is that the new rules aim to level the playing field and promote fairness in business dealings.

TIP: If you’re not well-versed in contract jargon, it might be a smart move to have a small business lawyer like me take a look at your contracts.

What makes a fair contract

So, how do you know if a contract is fair or not? The criteria for determining fairness haven’t changed. A term within a standard-form contract, whether for consumers or small businesses, is considered unfair if it meets these conditions:

• It creates a significant imbalance in the rights and obligations of the parties.
• It’s not reasonably needed to protect the legitimate interests of the party benefiting from it.
• It would cause harm, either financially or otherwise, if enforced.

Keep in mind that the outcome of this fairness assessment varies depending on the unique commercial circumstances. Each case is evaluated individually, ensuring fairness tailored to the situation.

NOTE: There isn’t a one-size-fits-all list of automatically unfair terms to check your contracts against.

The Consumer Law balancing act

Before you sign on the dotted line, take a moment to put yourself in both parties’ shoes. Are the contract terms fair for everyone involved? Make sure they protect your business interests without being too tough on the other party.

It’s all about balance. Your contracts should include counter-balancing terms. For instance, if your business needs to make changes, the contract should allow customers to exit without incurring penalties.

Clarity is Key

Contracts don’t have to be a maze of legal jargon. Keep them clear and straightforward, making sure the essential terms are easy to spot during the signing and renewal processes.

Compliance with the Law

Don’t try to outsmart the Australian Consumer Law. Avoid terms that infringe upon customer rights or make promises outside the contract.

What do these changes mean?

These new regulations broaden the scope of unfair contract term laws to include a broader range of small business contracts. The threshold now covers businesses with fewer than 100 employees or annual turnovers below $10 million. The contract value threshold is history, and the definition of ‘standard form contracts’ is now crystal clear.

The consequences for businesses under these new laws are significant. They could face maximum penalties of $50,000,000, three times the value of the “reasonably attributable” benefit obtained from the conduct, or 30% of adjusted turnover during the breach period if the court can’t determine the benefit. Individuals could be fined up to $2.5 million.

If you haven’t already, it’s high time to go through your standard form contracts and make sure they meet the new legal standards. These rules are already in effect and are all about promoting fairness and transparency in business interactions.

Stay ahead of the game, ensure your contracts are in line, and keep your business running smoothly. Once you’ve reviewed your contracts, don’t hesitate to contact a small business lawyer like me to ensure your business complies with these new laws. Ready to chat? Book a complimentary consultation here.

Source: https://www.accc.gov.au/media-release/businesses-urged-to-remove-unfair-contract-terms-ahead-of-law-changes

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