The Australian Consumer Laws will now offer protection to small businesses from unfair terms from other businesses. The unfair contract laws are there to protect consumers against unfair practices, however under the new Unfair Contracts act, some of these protections have been extended to protect small businesses as well (who don’t fall within the definition of consumer). The unfair Contracts Act is designed to make it harder for a business to enforce certain standardized contracts, or at least certain clauses in those contracts, against a small business.
From November 2015 Small businesses can find protection under the act for:
-Clauses that allow one party to increase the price without allowing the other party to then terminate the contract.
-Clauses that allow a party to vary the terms of the contract without informing the other party and allowing them to then terminate the contract.
-Clauses that allow one party but not the other to terminate
Will these protections apply to franchising?
Yes, if the upfront price of the contract is either less than $100,000.00 or if the contract duration is 12 months or more and the upfront price is no more than $250,000.00. Given the vast majority of franchise agreements are presented on a ‘take it or leave it’ basis and often do not allow the individual or small business to terminate the agreement before the term, there could be a flurry of activity as franchisors update their agreements. Other typical clauses in franchise agreements that allow the franchisor to buy back the franchised business at an unfair amount or to reduce the obligations they offer to provide, are likely to be no longer enforceable.
These new laws are still being debated in parliament, but it is expected that they will be passed and come into effect by the end of 2017. If you use a standardised contract, such as terms and conditions, you need to review your contracts. If you find clauses that give you all the power and your customer- be they an individual or a small business- none, you might need to re-phase the clause or perhaps get rid of it completely. Ask yourself if that clause is necessary to do business with you and protect your legitimate interests. If you have been using a standard contract “borrowed” off another business or maybe downloaded from www.whoknowswheres.com, it’s a great time to chat to us about getting a contract, or, terms and conditions that complies with these new amendments and is tailor made to your industry and your business.
If you are a small business you will soon have another bow to your string if you end up locked in a dispute regarding a contract.
If you need contract advice Coutts Solicitors & Conveyancers have over 15 years experience in providing legal expertise and guidance to businesses of the Macarthur. Coutts Solicitors can advise you on all legal aspects of business operations including purchasing a business, leases and business structures. With offices in Narellan, Picton and Campbelltown you can receive expert advise from professional and experienced commercial law solicitors with the convenience of being local.