Unfair contract terms regime gets bite

The current unfair contract terms legislation has the effect that consumers and small businesses (currently businesses with less than 20 employees) can seek to avoid unfair terms in contracts.

A term of a standard contract is potentially unfair if it:

(a) causes a significant imbalance between the rights of the parties;

(b) is not reasonably necessary to protect the legitimate interests of the party; and

(c) would cause financial or other detriment if it was relied upon.

Under amendments recently passed, the 20 employee threshold is to be increased to 100 employees and the monetary thresholds done away with.

Furthermore, courts will have the power to impose penalties on persons attempting to impose unfair contract terms, rather than simply declaring the term void.

Unfair contract terms are still very common in business to business standard form contracts. Businesses using standard form contracts should assess what provisions are necessary, and take advice on their contracts.

For advice on business matters and dealings, please contact Peter Muller peterm@qbmlaw.com.au or Megan Hanneman meganh@qbmlaw.com.au