ASIC has today released an information sheet about new protections for small businesses from unfair contract terms in standard form contracts. These protections already apply to standard form consumer contacts and will apply to standard form small business contracts from 12 November 2016.

The information sheet provides guidance about the new provisions, including how the law defines a standard form contract and ASIC's expectations that prior to 12 November 2016, businesses will review their standard form contracts.

ASIC Commissioner Greg Tanzer said, 'small businesses, like consumers, have limited market power and a reduced ability to vary 'take it or leave it' standard form contracts. The consumer unfair contract term protections get positive outcomes for consumers and ASIC anticipates being able to do the same for small business, once the protections are extended to them.'

ASIC, the Australian Competition and Consumer Commission (ACCC) and state and territory offices of fair trading are responsible for enforcing the law. ACCC's guidance can be found at www.accc.gov.au/uct.

Download

  • Information sheet Unfair contract term protections for small businesses (INFO 211)

Background

The unfair contract term protections will apply to all standard form contracts entered into or renewed on or after 12 November 2016, where, at the time of entering into the contract, at least one party to the contract is a business employing less than 20 people and where the contract is worth up to $300,000 in a single year or $1 million if the contract runs for more than a year. The new protections will also apply to any term of a standard form contract, which is varied on or after 12 November 2016.

The protections do not cover:

  • insurance contracts regulated under the Insurance Contracts Act 1984 (e.g. home insurance, car insurance etc)
  • the constitutions of companies, managed investment schemes or other kinds of bodies.

The protections also do not cover:

  • terms that define the main subject of the contract (i.e. the goods or services that are acquired under the contract, or a term that is necessary for the supply of goods or services to occur)
  • terms that set the upfront price payable
  • terms that are required or expressly permitted by a law of the Commonwealth, or a state or territory.

ASIC guidance on unfair contract terms in consumer contracts can be found in Information Sheet Unfair contract term protections for consumers (INFO 210).