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Businesses Urged To Review Standard Form Contracts Terms

Businesses Urged To Review Standard Form Contracts Terms

The Australian Competition and Consumer Commission (ACCC) has warned businesses that time is running out to review standard form contracts for unfair contract terms, with changes set to come into effect in November.

The changes will see existing unfair contracts provisions for consumers extended to include small businesses.

“The new law, which aims to protect small businesses from unfair terms in business-to-business standard form contracts, will apply from 12 November,” the ACCC advises.

“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. Under this new law, the courts will be able to strike out any unfair contract terms.”

According to the ACCC, small businesses enter into an average of eight standard contracts a year, and, with more than 2 million small businesses in Australia, the ACCC anticipates that the change “will potentially affect millions of standard form contracts”.

“The ACCC has engaged with many businesses during the transition period,” ACCC deputy chair Dr Michael Schaper commented. “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.”

Schaper explained that the ACCC has prioritised education and engagement efforts towards sectors including franchising, retail leasing and independent contracting, speaking in Melbourne at the Small Enterprise Association of Australia and New Zealand National Small Business Conference 2016.

“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 commented. “Our engagement to date suggests that there is still more to do before November 12.”

The ACCC has engaged with the retail leasing industry, including landlords of major shopping centres, with many landlords having amended terms that allowed “a very high level of discretion in seeking costs from their small business retail tenants”.

With some leases also including terms allowing landlords to unilaterally vary shopping centre rules such as trading hours, most landlords have agreed to amend terms to limit the types of variations that landlords can make, the ACCC stated.

“The quick steps that have been taken by the retail leasing industry are a guide for other sectors in adequately preparing for the new unfair contract terms law,” Schaper stated.

“All businesses should make an effort to understand how they will be affected by the law and whether it covers any deals they are engaged in.”

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