You’ve all heard about unfair dismissal – where an employee who has their employment terminated argues it was unfair.

Some time ago, consumers were given the right to sue companies if the terms of their contract with the company were unfair. If the Court found that the term was unfair, it could effectively remove the term from the contract.

When faced with a “David and Goliath” struggle, only a relatively small number of consumers brought these cases.

The news for you is this:

From November 2016, any party to contract for goods and services can sue the other party if they believe a term or terms of the contract are unfair, provided:

  1. One party to the contract has less than 20 employees (excluding true casuals);
  2. The “upfront price” under the contract is less than $300,000 (for contacts of 12 months or less) or $1,000.00 (for longer contracts); and
  3. The contract is a “standard form contract”.

If a Court finds a contract term to be unfair, the Court can stop a party from enforcing the unfair term, and even award compensation if a party is injured by the operation to the unfair term.

Sounds simple, doesn’t it. But consider this, having regard to your own “standard form” contracts.

First, an unfair term is an extremely loose term – loose enough to cover a broad range of different contract provisions.

So, for example, if you have the right under your contract to vary the terms of the contract or the goods or services to be supplied, or have the right not to renew the contract at the end of its term, you are very likely to have unfair terms in your contract. To oversimplify, terms that provide you with rights without allowing the other party a reciprocal right (i.e. lack of mutuality) are under threat from this legislation.

Second, It doesn’t matter if you are the supplier or the customer. It doesn’t matter if there is one party to the contract or ten parties. Nor does it matter that you’ve always been using the standard contract. The legislation applies in all these situations.

So what you need to do to avoid your customers from challenging your contracts?

Between now and November 2016, you need to review your standard contracts to identify terms that are likely to be considered to be unfair – and classify them as “unfair”, “likely to be unfair” and “may be unfair” and lets call it “safe”.

You then need to make a commercial decision about whether you amend the terms now, or “run the gammit” and wait to see how your customers or suppliers respond to those terms once the new legislation applies.

As only standard from contracts are caught by the provisions, it may be possible to side step the provisions if you can show your contracts are not standard form. You can potentially do this by holding discussions before providing contract terms to your customers, or demonstrating that you are willing to negotiate terms.

We are available to help, and apply our knowledge of the existing consumer protection laws to your standard form contracts and contracting practices.