Consumer Protection extending to small business
The amendments will apply where one of the parties is a small business and where the parties have agreed to standard form contract provisions valued at less than a prescribed threshold.
The legislation was introduced in Federal Parliament in late June and finally passed both houses on 20 October 2015.
It is expected that the extension of protection to standard form small business contracts will not preclude existing protections for consumer contracts including where there is any overlap (e.g. one party is a consumer and the other party is a small business).
The definition of small business is understood to be a business employing fewer than 20 persons. Casual employees not employed on a regular or systematic basis are excluded.
Further discussion in the business community can be expected as there will be a 12 month period of grace from when the Bill receives Royal Ascent.
This period of 12 months will give all businesses an opportunity to review standard form contracts with the aim of modifying terms and conditions in standard form contracts which might be regarded as unfair. It has been recognised that existing laws have largely addressed “unfair” behaviour in business dealings rather than unfair contract terms. Similarly the protections available under the ASIC Act for unfair contract terms only assisted consumers and not businesses.
In summary, the new laws are expected to extend the consumer unfair contract term provisions in the ASIC Act to cover small business contracts that are standard form and valued less than a prescribed threshold. In addition, the amendments will allow for the exemption of small business contracts that are standard form and are subject to prescribed laws deemed equivalent to the unfair contract term provisions in the ASIC Act, which are enforceable.