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Changes to contracting legislation

On 12 November 2015, The Parliament of Australia passed the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015, fulfilling an election commitment by the Coalition Government. The Bill amends the Australian Securities and Investments Commission Act 2001 (ASIC Act) and Australian Consumer Law (ACL) - set out in the Competition and Consumer Act 2010 - to extend the unfair contract term protections currently available to consumers. These protections cover businesses with less than 20 employees agreeing to standard form contracts valued at less than a prescribed threshold.

The ASIC Act and ACL currently contain mirror consumer unfair contract term protections. The ASIC Act's requirements apply to financial services and products and the ACL applies to the supply of goods or services other than financial services or products and the sale or grant of an interest in land.

The Bill's explanatory memorandum identifies the main changes as:

  • The extension of the consumer unfair contract term protections to small business contracts will allow unfair contract terms to be declared void and for the contract to continue to bind the parties if it can operate without the unfair term. This will reduce the incentive to include and enforce unfair terms in small business contracts, providing a more efficient allocation of risk in these contracts, and supporting small business' confidence in agreeing to contracts.

  • Businesses that offer low-value standard form contracts to small businesses may need to review and amend their contracts to ensure they are compliant with the new protections.

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