Small Business – Good News When Contracting

As from 12 November 2016, in general terms, small businesses who enter contracts will find that they do not have to accept  ‘take it or leave it’ standard-form contract conditions. The objective of the change in the Federal law will be to stamp out unfair and one-sided contracts for small businesses in commercial dealings.

In general terms, the new law will apply, where one of the businesses to the contract employs fewer than 20 people and the upfront price payable under the contract does not exceed $300.000.00 or, if the contract is for more than 12 months, $1,000,000.00

The types of contracts that look like being covered will include: credit; housing and construction; utilities; hire of goods; direct selling; motor trades; retail leases and communications as well as, for example, franchising, accommodation, professional and technical services, publishing, entertainment, health care, and education.

The onus will be on the business presenting the contract to show that the intended contract is not a “standard form contract.”

This article will not go into what a business has to show to prove that the contract is not a “standard form contract”. However, suffice to say, remedies for small businesses that prove they have been contractually ‘stood over’, so to speak, will include a court or tribunal order that a term is unfair, with it being taken out of the contract, along with an injunction; a financial penalty or a compensation order  against the offending business.

Adopting a ‘fairness test’ in business contracts will provide an easier way for small businesses to challenge contracts put to them and help small businesses become more able to compete in the market, without being held back by counter-parties contractually standing over them. It is hoped that this will be good for small business investment and jobs growth.

Jim Wilson, Principal.