Contracts need scrutiny for ‘unfairness’

BUSINESS leaders are going to have to get their heads around new small business contract law provisions and modify their approaches, according to Optimum Recoveries managing director Angela McDonald

New provisions came into force in November to help protect small businesses from unfair terms in contracts – and they also apply to standard form contracts entered into or renewed from November 12, 2016. 

Ms McDonald said the law highlighted some examples of terms that may be unfair, including terms that enable a business to avoid or limit their obligations under the contract; enable a business to terminate the contract; penalise a business for breaching or terminating the contract; or enable a business to vary the terms of the contract.

“Most small businesses use standard form contracts: these are ‘generic’ contracts where the other party has little or no opportunity to negotiate the terms – in other words, take it or leave it,” Ms McDonald said.

“If a court or tribunal finds that a term is ‘unfair’, the term will be considered void – this means it is not binding on the parties,” she said. “The rest of the contract will continue to bind the parties to the extent it is capable of operating without the unfair term.”

Ms McDonald said most of Optimum’s clients were seeking urgent assistance with standard form contracts they were presently using, to ensure they were legally binding under the new laws.

These included franchise agreements, manufacturing and distribution agreements, business terms and conditions, licence agreements, service agreements and leases. Optimum Recoveries is a 2016 Queensland Leaders Executive Member.

www.optimumrecoveries.com.au

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