The Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 (the Bill) was passed through parliament on the 26th October 2015. The Bill will amend the Australian Consumer Law which is Schedule 2 to the Competition and Consumer Act 2010 (Cth) (CCA) as well as the Australian Securities and Investment Commissioner Act 2001 (Cth) (ASIC Act) to extend the unfair contract terms protections to small businesses.

Small businesses are defined as those employing less than 20 employees, excluding casual employees not employed on a regular and systematic basis.

The explanatory memorandum on the Bill explains that small businesses, like consumer, are often vulnerable to unfair terms in standard form contracts which are presented on a ‘take it or leave it’ basis. This is a result of a lack of resources to understand and accordingly negotiate contract terms. The impact of this power imbalance is that small businesses often avoid entering into contracts where they  believe that negotiation of the terms will be futile resulting in significant losses of opportunity. The extension of the unfair contract terms protection to cover small businesses will address this vulnerability by allowing unfair contract terms to be declared void.

A contract is a small business contract if, at the time it is entered into, at least one party is a small business; with the subject of the contract relating to the supply of goods or services or sale or grant of an interest in land, and the upfront price payable under the contract does not exceed either $100,000, or $250,000 if its duration is more than 12 months

The Bill is yet to receive Royal Assent and the amendments to the CCA and the ASIC Act will come into effect 6 months from the date of assent.

For further information about the way in which the amendments will operate please see our previous article or contact us.