Crackdown on unfair small business contracts

Peter Terlato 14 November 2016

contract signing

ACCC reforming terms for "take it or leave it" agreements.

Australia's competition regulator has released a new report identifying areas of concern in regards to small business employment contracts across a variety of industries, providing guidance and likely consequences for those brokering unfair terms.

The Australian Competition and Consumer Commission's (ACCC) Unfair terms in small business contracts report reviewed 46 contracts across seven industries, offering a detailed industry-by-industry breakdown, identifying three types of problematic terms as being widespread and likely to cause concern.

These include terms which give one party an unconstrained right to unilaterally vary key aspects of a contract; terms that unfairly seek to shift liability from the contract provider to the small business; and terms that provide unnecessarily broad termination rights.

The report engaged businesses from the advertising, telecommunications, retail leasing, independent contracting, franchising, waste management and agricultural industry.

According to the ACCC, standard form contracts provide little or no opportunity for the responding party to negotiate terms - they are offered on a "take it or leave it" basis.

Small businesses sign an average eight standard form contracts per year.

From 12 November, new legislation will protect those entering into small business standard form contracts, including agreements between businesses where one of the businesses employs less than 20 people and the contract is worth up to $300,000 in a single year or $1 million over more than a year.

Over the last 12 months, businesses such as Australia Post, News Limited, Optus and Scentre Group (Westfield) have amended or removed contract terms, relative to the new law.

The ACCC says small businesses should reflect whether their contract terms create an imbalance of obligations between parties. Contract terms should only be as broad as reasonably necessary to protect their legitimate interests, as terms that grant rights beyond this are likely to be considered unfair.

Almost two-thirds of small businesses claim to have experienced unfairness in contract terms and conditions they've signed, while half of those report experiencing some harm as a result.

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