au iconAU



50% of small business utilising fair contracts law

One in two small businesses have relied on the unfair contracts term legislation since its inception last year, according to a new survey.

50% of small business utilising fair contracts law
smsfadviser logo

The East & Partners SME Transaction Banking survey of over 1,200 SME businesses found that 49.6 per cent had relied on the unfair contracts term law to negotiate fairer terms in the past six months.

Legislation to protect small business from unfair terms was passed 12 November 2016 to cover businesses that employ less than 20 people for contracts worth up to $300,000 in a single year or $1 million if the contract runs for more than 12 months.

ACCC deputy chair Dr Michael Schaper said the regulator was serious in enforcing the new laws, having taken successful court action against a major waste management company, JJ Richards & Sons Pty Ltd, and commenced proceedings against serviced office space provider, Servcorp Ltd.

“These cases show the ACCC is serious about enforcing the new laws, and we will continue to take action where appropriate to ensure that small businesses are protected,” Dr Schaper said.

“ACCC engagement has seen tens of thousands of new or existing contracts improved, but this is the tip of the iceberg as Australia’s 2 million small businesses sign an average of eight standard form contracts a year.”

Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell said the protection was “badly needed” and that her office had handled more than 20 assistance cases involving unfair contracts.

Ms Carnell also said she was encouraged that most big businesses understood their obligations and had acted to ensure compliance.

“I wrote to Amazon recently to ensure their Australian contracts conform with the legislation and received a positive response. I’ve also written to Ali Baba along similar lines,” Ms Carnell said.

“After a Federal Court ruling against the contracts used by JJ Richards, I wrote to other waste management companies and received assurances of their compliance.

“If a court finds that a term in a standard form contract is unfair, the term is void. This means that the term is treated as if it never existed.”

Minister for Small Business Michael McCormack said small business should not be afraid to ask the other party to the contract to amend or remove an unfair term if they have identified one.

"If the term is not removed or altered, I strongly encourage the small business to report it to the ACCC or seek assistance from their state Small Business Commissioner or the ASBFEO,” said Mr McCormack.

"The laws protect small businesses, which on average sign eight standard form contracts a year and complement the government's changes to Section 46 of the act which create a level playing field and greater protections to balance the small business to big business market relationship."

Subscribe to Public Accountant

Receive the latest news, opinion and features directly to your inbox