unfair terms

Consumer Protections Extending to Small Businesses

Consumer Protections Extending to Small Businesses

Commencing on 12 November 2016, small businesses will have some of the protections that consumers have under the Australian Consumer Law.

Traditionally, consumers are protected from unfair terms when buying goods or services from businesses, and this will continue. These protections will be extended to small businesses, so that small businesses will be protected when buying goods or services from big businesses, or even from other small businesses.

A small business will be any sole trader, partnership, or corporate entity that has less than 20 employees. There is no other revenue test, or any other test for a small business. So if you are a small business entering into a contract to sell goods or services to another business, it would be important for you to know if you were dealing with a small business or not.

The other condition is that the contract for the goods or services must be under $300,000, or if the contract is for services over more than 12 months then the price cannot be more than $1,000,000.

This means that these new protections will apply to many, many new contracts, and protect many small businesses throughout Australia.

For big business, this means that they will need to review their terms and conditions for contracts with small businesses, to make sure that there aren’t any unfair terms.

So what are some terms that could be found to be unfair?

  • A term that allows the big business to terminate the contract, but not the small business
  • A term that penalises a small business for breaching or terminating the contract (like having to pay a fee)
  • A term that allows the big business to vary the terms of the contract, but not the small business
  • A term allowing the big business to change the price of the contract, without allowing the small business to terminate the contract
  • A term that allows the big business to vary the characteristic of the goods or services, without allowing the small business to terminate the contract
  • A term that allows the big business to assign the contract to someone else, without the consent of the small business
  • A term that tries to limit the small business from suing the big business
  • A term that tries to limit the evidence that a small business could use against the big business, or
  • A term that tries to shift the burden of proof onto the small business.

unfair termsSmall businesses that enter into contracts with big businesses and small businesses might want to have two different versions of their standard terms and conditions. The small businesses will need to be protected from unfair conditions, but the big businesses get no such protection.

Please make sure you review your standard contracts to make sure they will still stand up under this new set of laws.

If you’re a small business, then you now know that you don’t have to be pushed around by bigger businesses anymore, and that you have avenues to seek remedies for unfair terms of contracts you enter.

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