How to Deal with Unfair Contract Terms
30 Jan 2023
The new Unfair Contract Terms regime affects small businesses and applies to standard form contracts with a value of up to $300,000 (or up to $1 million if the contract is for more than 12 months). It applies to a wide range of industries and also applies to credit contracts.
The Law
Under the new law, credit providers are prohibited from using unfair contract terms in their agreements with small businesses. This includes terms that are one-sided, cause a significant imbalance in the rights and obligations of the parties, or are not reasonably necessary to protect the legitimate interests of the credit provider. If a term is found to be unfair, it will be void and unenforceable.
The new law provides important protections for small businesses when entering into credit agreements, helping to ensure that the terms are fair and reasonable. It is important for small businesses to be aware of their rights under the new law and to review the terms and conditions of any credit agreements carefully before accepting them.
By being aware of the new protections and taking steps to protect their rights, small businesses can make informed decisions about their credit agreements and safeguard their financial interests.
How to Manage Unfair Contract Terms
If you come across unfair contract terms in your contract, you may have several options for addressing the issue. Here are some steps you can take:
A. Review the Contract Carefully!
Take the time to review the contract thoroughly and make sure you understand all of the terms and conditions. Pay particular attention to any terms that may be one-sided, cause a significant imbalance in the rights and obligations of the parties, or are not reasonably necessary to protect the legitimate interests of the business.
- Notice requirements;
- Fees (including any termination fees, restocking fees, or any other fees the credit provider is proposing to impose on you);
- Interest being charged on outstanding amounts.;
- PPSR applications;
- Suspensions;
- Delivery of goods; and
- Any guarantees that are being made by you.
B. Seek Legal Advice
If you are unsure about the fairness of the contract terms, or if you have any questions, consider seeking legal advice. A lawyer can help you understand your rights and options and can advise you on the best course of action.
C. Negotiate the Terms
If you believe that certain terms in the contract are unfair, you may be able to negotiate with the other party to have them revised or removed. It may be helpful to seek legal advice before negotiating to ensure that you are negotiating from a position of strength.
It is important to note that when negotiating, there are multiple ways you can amend the Terms:
- Simply having the wording of clauses amended to provide better clarity or understanding may be sufficient to protect you interest, but this will always depend on the clause in question;
- In some circumstances, you may need to remove parts of or full clauses in order to balance contracts.
D. Consider Alternative Options
If the other party is unwilling to revise or remove the unfair terms, you may need to consider an alternative provider.
E. Did you already sign the Contract?
If you are unable to resolve the issue through negotiation or other means, you may have the option to seek legal remedies, such as seeking a declaration that the term is unfair or seeking damages for any loss or damage suffered as a result of the term. However, it is important to note that the specific remedies available will depend on the specific circumstances of the case.
F. Reporting
If you come across a contract with unfair contract terms, you can report individuals or companies in breach of the Australian Consumer Law to the Australian Competition and Consumer Commission (ACCC). The ACCC is responsible for enforcing the unfair contract terms provisions of the Act and can provide assistance and advice to small businesses who have been affected by unfair contract terms.
It is important to note that the ACCC may not be able to assist with all complaints or disputes, and some matters may need to be resolved through other means, such as negotiation or legal action. However, the ACCC can provide guidance and assistance to small businesses in understanding their rights and options and can help to facilitate resolution of disputes where possible.
Constructive Legal Solutions is here to assist with everything relating to unfair contract terms and making sure your business is protected. Call 1300 972 092 or send your enquiry to admin@constructivelegalsolutions.com.au for tailored advice.
