Do you need to review your standard form B2B contracts for unfair contract terms?
From 12 November 2016, a new law will protect small business from unfair terms in standard form contract will apply. If you are entering into, or varying an existing business to business contract on or after this date, this may be relevant to you.
What contracts will the law apply to?
The law will apply to standard form business to business contracts which have been prepared by one party and which are not open to meaningful negotiations – they are provided on a “take it or leave it” basis.
What does “unfair” mean?
To be “unfair” the contract term needs to:
(a) cause a power imbalance between the parties rights and obligations;
(b) not be reasonably necessary to protect the legitimate interest of the party who has the benefit of the term; and
(c) cause financial or other detriment to the small business if it was relied on.
Who will the law apply to?
With limited exceptions, the law will apply to contracts for the supply of goods or services or the grant of interests in land where:
- at least one of the parties is a small business (employing less than 20 people); and
- the upfront price payable under the contract does not exceed $300,000 or $1 million if the contract is for more than 12 months.
Top 5 Unfair Contract Terms Action Points
- Are you a small business or do you trade with small business?
- If so, identify the standard form contracts that you use.
- Who is responsible for maintaining and updating them? Are they centrally managed?
- Do you let your customers negotiate these standard form contracts with you, or are they “take it or leave it”?
- Have your standard form contract reviewed by a business lawyer who understands your business and the requirements of these requirements.