Small businesses are becoming increasingly vulnerable to unfair terms in standard form contracts.  The Government has got closer to addressing this vulnerability by extending the unfair contract protection to include small business contracts.  But what is a small business? And what types of clauses are void?

What is a small business?

For a contract to be deemed a small business contract, it must meet three requirements;

1. The contract must be for a supply of goods or services, or a sale or grant of an interest in land; and

2. At the time the contract is entered into, at least one party must employ fewer than 20 employees (including full-time, part-time and casual employees); and

3. Either;

   1. The contract has a duration of less than 12 months and the upfront price payable under the contract does not exceed $300,000; or

   2. The contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000 

If the contract meets these criteria, the protection will apply. However, where an industry specific law is regarded to be enforceable and equivalent, the application of the unfair contract term protections for small businesses may be exempt. 

When will the laws apply?

This protection will come into effect by 12 months after Bill has been given Royal Assent. Contracts that are entered into or renewed, or terms of existing contracts that are varied on or after the date the legislation comes into effect, will be required to comply with the new protections.

The proposed changes have been passed by the Senate, and it is hoped they will be enacted in the current session.

We suggest that it may be appropriate for you to consider your own terms and conditions to see whether any of the following are present:

Clauses found to be void under the existing laws  

Here is an example of some of the clauses that have already been found to be void as being unfair:

• We may change or update this website and the terms and conditions at any time without providing you with prior notice.
• You may not cancel, or otherwise terminate the Agreement or revoke any authority given under it after we certify that the Installation of the services has commenced.
• We may at any time, without notice and at our absolute discretion, suspend or disconnect your access to part or all of the service, or delete or deny you access to your data if we have reasonable cause to do so.You acknowledge that you enter into this agreement entirely as a result of your own enquiries and that you do not rely on any statement, representation or promise by us or on our behalf not expressly set out in this agreement.
• To the fullest extent permitted by law, [the company] disclaims all representations and warranties, express or implied, including but not limited to implied warranties of merchantability and fitness for a particular purpose and non-infringement.
• You understand, acknowledge and agree that you are assuming the entire risk as to the quality, accuracy, performance, timeliness, adequacy, completeness, correctness, authenticity, security and validity of any and all features and functions of [the product], the Website and Content.

Some of the above may seem somewhat severe and may be in need of further explanation. We are more than happy to provide that to you.

In view of these changes, there is significant merit in considering whether or not your standard terms and conditions need to be reviewed and updated so as to protect you from prosecution both from the Australian Competition and Consumer Commission or the Privacy Commissioner.

By: Tal Williams, Partner and Lucy Williams, Paralegal