Standard form contracts with small businesses – users beware

Standard form contracts are commonplace in Australian business. Examples can be found in the franchising, retail leasing, telecommunications and many other sectors of the economy where ‘business-to-business’ contracts are entered into. Essentially these contracts are ‘take it or leave it’ contracts where the business signing up has little or no opportunity to negotiate alternative terms.

The Australian Competition and Consumer Commission (‘ACCC’) has announced that users of standard form contracts are in their sights where they employ unfair terms and where:

  • The contracts were entered into, renewed or varied on or after 12 November 2016;
  • one of the businesses has less than 20 employees;
  • the value of the contract is less than $300,000, or $1 million where the contract term is longer than 12 months.

Such cases may of course be pursued by the ACCC, the Australian Securities & Investments Commission or by individual businesses and even class actions.

Some examples of potentially unfair terms are those where one party has unreasonable rights to:

  • refuse to allow the contract to be terminated;
  • limit liability against loss or damage;
  • refuse to allow the contract to be varied.

The ACCC has viewed such clauses as likely to go beyond what is reasonably necessary to protect a business’ legitimate interests and able to cause detriment to the small business if relied upon.

Given the warning issued by the ACCC, all businesses need to consider:

  • am I contracting with a small business?
  • is my contract a ‘standard form’ agreement?
  • if yes, can the terms be justified as ‘reasonable’?

The lawyers at DSS Law are experienced in drafting and negotiating contracts for large and small businesses and can assist you to review your contracts to ensure that you are protected.

Kaye Griffiths Kaye Griffiths 26/09/2017

Disclaimer

DSS Law insight articles are intended to provide commentary and general information. They should not be relied upon as formal legal advice. If you would like specific advice relating to this topic, please contact DSS Law on 1300 DSS LAW or epost@dsslaw.com.au.