Big problems contracting with small business?


Posted By on 9/02/16 at 5:19 PM

There’s a big change coming for business-to-business agreements for the supply of goods, services, land, and financial products, and you’ve only got until November 2016 to get your affairs in order.

If you are a small business, or you deal with small businesses, and use standard form T&Cs, then you need to be aware that, come November, some of your favourite parts of those T&Cs may be unenforceable as ‘unfair contract terms’ (UCT) under the Australian Consumer Law (ACL).

Spotting a UCT can be difficult without the benefit of experience, but they typically:

  1. Cause a significant imbalance between the parties in terms of their rights and obligations.
  2. Would cause damage, financial or otherwise, to a party if enforced.
  3. Are not reasonably necessary to protect the legitimate interests of the party seeking to enforce.
  4. Are not sufficiently clear or communicated to the party being bound in a timely, effective way.

However, rest assured that the following terms are safe (hurray!):

  1. Terms defining the goods or services being supplied.
  2. Terms determining price.
  3. Terms that are expressly required or permitted by another law (e.g. permitted limits on liability under the ACL).

UCTs in standard form T&Cs (on your website, your order forms, invoices, or application forms) can be voided by a court or tribunal, which could mean big losses for your business – now more than ever. The national law around UCTs has been in place since the ACL came into effect in 2010, but up until this year has only applied to individual consumers. Now ‘small businesses’ will be covered too.

Your standard form T&Cs will be captured if:

  1. at the time the contract is entered into, at least one party is a business that employs fewer than 20 people (not including casual employees not employed on a regular or systematic basis) (small business); AND
  2. either of the following applies:
  1. the upfront price payable under the contract (not including interest) is less than $300,000; or
  2. if the term is more than 12 months, the upfront price payable is less than $1,000,000.

Here’s some good news: the extension does not apply to contracts for shipping or insurance. Now here’s some more of the bad kind: the UCT extension will apply to your T&Cs if either you OR your customer is a ‘small business’, and it will apply both to contracts entered into after 11 November 2016 and to any contracts renewed or varied after that date.

Avoiding UCTs is always good practice, even if you’ve got 500 employees and your customer base is strictly big business. Luckily, the government in its infinite wisdom has given you time to get your T&Cs safely UCT-proofed — but that time is quickly ticking-away.

We offer fixed-price contract review services, and have the business-friendly knowledge and experience to help you:

  1. Make sure every clause of your standard form T&Cs are air-tight and enforceable; and
  2. Take all necessary steps to ensure your T&Cs are clearly and effectively communicated to your customers.

Ask us about a T&C refresh, or tailoring your own modern, plain-English T&Cs from scratch!

Amelia Edwards

Amelia Edwards Special Counsel

Since joining us in 2014, Amelia has developed broad commercial experience and interests working across the firm’s practice areas and on secondment. She holds a Bachelor of Arts (Anthropology)... Read More