New unfair contract penalties a win for small business

The NSW Small Business Commissioner has welcomed new penalties for unfair contract terms, which take effect on 9 November.

Changes to Australian Consumer Law will prohibit businesses from proposing, using, or relying on unfair contract terms in standard form contracts with consumers and small businesses.

Courts will be able to impose substantial penalties on businesses and individuals who include unfair terms in their standard form contracts. Currently, a court can only declare specific terms of a contract unfair and therefore void.

The Australian Competition and Consumer Commission and the NSW Small Business Commissioner are encouraging all businesses to review their standard form contracts and remove or amend any unfair contract terms before new penalties take effect.

NSW Small Business Commissioner Chris Lamont said the changes apply to standard form contracts made or renewed on or after 9 November 2023 or to a term or a contract that is varied or added on or after 9 November 2023. “The new regime will provide some welcome and much needed assistance in striking out unfair contract terms imposed on small businesses who contract with large businesses,” Mr Lamont said.

While some of the changes will not apply to contracts until they are renewed, or a new contract is entered into, businesses should be proactive in reviewing their standard form contracts now.

The changes will also expand the coverage of the unfair contract term laws to apply to more small business contracts than before. The threshold for small business contracts will increase and apply to small business that employ fewer than 100 persons or have an annual turnover of less than $10 million.

Businesses can view information about changes to the unfair contract terms laws on the ACCC’s website.