Creating an Even Playing Field: Extending Unfair Contract Term Protections to Small Business

Freya Weston MinterEllison

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Typically, Unfair Contract Terms allocate contract risks to the party that is less able to manage them.

The unfair contract term (UCT) protections which currently apply to consumers under federal legislation have been extended to small businesses. This will have a significant practical effect on contracts between small and large businesses and will go some way to levelling the playing field in the case of standard form contracts. Government and small and large businesses should review the wording of such contracts in view of the extension of the protections.

Background to the changes

From 12 November 2016, the UCT protections have been extended to small businesses with less than 20 employees entering into standard form contracts of less than the prescribed value1 by the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 (Cth) (the Act). The Act amends the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and the Australian Consumer Law (ACL) (being Sch 2 of the Competition and Consumer Act 2010 (Cth)). The ASIC Act and the ACL contain mirror UCT provisions for consumers, with the ASIC Act specifically applying to the provision of financial goods and services and the ACL applying to the acquisition of goods or services (excluding those financial goods and services covered by the ASIC Act).

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