A new law directed at addressing unfair terms in standard-form contracts where a small business is a signatory has commenced on 12 November, 2016 and applies to contracts between businesses which have been formed, renewed or varied after this date. If a particular term is found to be unfair it will be void and the small business will not be required to comply with the term. The agreement will remain valid to the extent that is possible without the unfair term.

The ACCC has reviewed standard form contracts including those for retail leasing and franchising to identify terms that may be deemed unfair under the new laws. Common problems identified included terms allowing the contract provider to unilaterally vary all terms in an unconstrained manner, an unreasonable ability to cancel or end an agreement and terms imposing broad indemnities or excessive limitations of liability allowing for unreasonable powers to protect against loss or damage at the expense of the small business.

Terms that exceed the measures reasonably necessary to protect a business’s legitimate interests are likely to raise concerns under the new law. For example, a term allowing the landlord to terminate a retail lease for any breach without notice, regardless of the trivial nature which does not include an opportunity for the tenant to remedy the breach would be viewed as concerning to the ACCC.

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