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What the Unfair Contract laws actually do

The unfair contract laws were proclaimed on 12 Nov 2015 and take effect in November 2016. During the transition period the Australian Consumer and Competition Commission is reviewing contracts to make sure they are compliant.

Unfair contract protections for small business people

The Act bans unfair contract clauses for small businesses. Where, as the Act says:
  (4)  A contract is a small business contract if:
(a)  at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and
(b)  either of the following applies:
(i)  the upfront price payable under the contract does not exceed $300,000;
(ii)  the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000.
The Act embeds or codifies the ‘structural’ principles of commercial contract in statute. They ensure that standard form contracts have a measure of power balance such that they engender contract trust—that is, the contracts have integrity.

The laws make it clear that a contract is ‘unfair’ if it gives one party, but not the other, the ability to:
a)  Avoid or limit the performance of the contract.
b)  Terminate the contract.
c)   Apply penalties against the other party for a breach or termination of the contract.
d)   Vary the terms of the contract.
e)   Renew or not renew the contract.
f)    Vary the price payable under the contract without the right of the other party to terminate the contract.
g)   Unilaterally vary the characteristics of the goods or services to be supplied under the contract.
h)   Unilaterally determine whether the contract has been breached or to interpret its meaning.
i)    Limit one party’s vicarious liability for its agents.
j)    Permit one party to assign the contract to the other party’s detriment without their consent.
k)   Limit one party’s right to sue the other party.
l)    Limit the evidence one party can adduce in legal proceedings in respect to the contract.
m)  Impose the evidential burden on one party in legal proceedings in respect to the contract.
If a standard form contract has clauses like this the clauses are ‘null and void.’ That is the clauses have no force at law.

Note: The laws do not go to the price of a contract or the actual things to be done under a contract. 

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