The Australian Government has stated its intent to protect small businesses by extending the current unfair contract provisions to apply to small businesses that enter into contracts in the commercial environment.
Currently, protection from unfair contracts under the Competition and Consumer Act 2010 (Cth) (the Act) is only available to ‘consumers’ who enter into standard form contracts. The Commonwealth Treasury is undertaking a consultation process on behalf of Consumer Affairs Australia and New Zealand. On 23 May 2014 the Treasury released a Consultation Paper.
What is the aim of the proposed extension?
The main motivation behind the Treasury’s consideration of extending the Act is to “level the playing field” in commercial transactions by protecting small businesses who lack the commercial experience, expertise and resources to negotiate contract terms or understand the legal and practical implications of contract terms.
What are the issues in discussion?
The Consultation Paper poses a number of key questions relating to the problem of unfair contracts and the policy responses required. Some of the key questions focus on the following issues:
Extension of protection – what will this mean?
If the Australian Government legislates to extend the current unfair contract provisions to small businesses, businesses will need to review their standard form ‘business to business’ contracts to ensure that they do not contain any unfair contract terms, and assess whether the terms need to be varied or removed. Otherwise, they will face the risk of the terms being declared void.
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