Unfair contract terms: lessons to be learned says IPA

THE corporate regulator took on the case against Bendigo and Adelaide Bank for unfair terms within small business contracts and the lessons learnt should sound warning bells to others, according to the Institute of Public Accountants (IPA).

“The IPA has been a long-time advocate for leveling the playing field when it comes to unfair contract terms for small business and we commend ASIC for taking this up with Australia’s fifth largest retail bank,” IPA group executive policy and technical, Vicki Stylianou said.

“In the case of the Bendigo and Adelaide Bank, the Federal Court found that the unfair terms in the small business loan contract had caused a major imbalance in the parties’ right and obligations under the contract, and further, the terms would cause detriment to the small businesses involved if the terms were utilised.

“ASIC pursued the case, noting that some of the unfair terms provided the bank with the ability to vary the terms and conditions of the contract without giving the small business borrower due warning, as well as the capability to exit the contract without penalty.

“This case should herald a sharp warning to other financial institutions and corporations, that the insertion of unfair contract terms is potentially breaking the law.

“It is also a telling factor that legislation around unfair contract terms is only as good as the enforcement that prevails as was this case with the bank.

“Small businesses should also be wary in entering contracts, ensuring they understand the terms and conditions and where necessary seek advice from their trusted adviser before signing,” Ms Stylianou said.

About the Institute of Public Accountants

The IPA, formed in 1923, is one of Australia’s three legally recognised professional accounting bodies.  In late 2014, the IPA acquired the Institute of Financial Accountants in the UK and formed the IPA Group, with more than 37,000 members and students in over 80 countries.  The IPA Group is the largest SME focused accountancy organisation in the world. The IPA is a member of the International Federation of Accountants, the Accounting Professional and Ethical Standards Board and the Confederation of Asian and Pacific Accountants. 

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