Heralded as the single biggest change to the way parties do business in decades, there has been much said about the impending ‘business to business’ unfair contract term laws. What is clear is that the new laws are here to stay, and all businesses will need to turn their minds to the new provisions when entering into contracts, enforcing their rights under contracts, and when contractual provisions are being enforced against them.
Here is a snapshot of the new laws:
- The laws will apply to contracts entered into on, and from, 12 November 2016
- The laws only apply where a contract is in a standard form, and meets the definition of a ‘small business contract’. A contract will be a small business contract if:
- 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
- either of the following applies:
- the upfront price payable under the contract does not exceed $300,000; or
- the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1 million.
- If you have a small business contract that is in a standard form, any ‘unfair term’ will be void. A term will be unfair if it:
- would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
- is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and
- would cause detriment if it were to be relied on.
The laws apply to government bodies to the extent that they are carrying on a business.
The new laws will apply to a myriad of contracts, such as standard supplier terms, the terms under which independent contractors are engaged and licencing agreements. Businesses should be taking stock to determine which of their standard form contracts may be caught by the laws, and reviewing and revising those that will fall within the law’s ambit. Many will already be dealing with the counterpart business to consumer laws that have existed for some time, and will now need to develop strategies to deal with its application to small business dealings.