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NOVEMBER 2023 CHANGES TO SMALL BUSINESS CONTRACT LAWS WITH SPRINTLAW

If you’re a small business, then it’s important to be aware of the new legislation changes happening in November 2023 as these will impact businesses all over Australia.

To help you get ahead, we’ve prepared a short summary just for you. Check out the full article here for more information.

What Are The Changes Happening In November 2023?

Here’s a breakdown of the changes happening later this year:

• From 9th November 2023, new Unfair Contract Term laws will be introduced affecting all small business and consumer standard form contracts, including heavy penalties of up to $50 million for businesses that don’t comply.
• What’s changed? Unfair Contract Terms (UCT) refer to any clauses in your contracts that could be seen as ‘unfair’ (for example, imposing an obligation on your customers that would seem unfair or imbalanced). Previously, having an UCT meant that if that term was ever challenged, a court could just make it ‘void’. However, the new laws go even further where you may now be charged penalties of up to $50 million for businesses (or $2.5M for individuals). In certain circumstances, this could be even more.
• Am I affected? In simple terms, you’ll be affected if your standard terms and conditions contain any unfair terms, and if either you or the client accepting the T&Cs are a small business, or if a consumer accepts these terms.
• What can I do? As a starting point, you should seek legal advice to see if the UCT changes affect you. If it does, you should review and amend your contracts and standard form agreements for any UCT’s before the laws take effect on 9th November 2023.

What’s A Standard Form Contract?

Standard form contracts are pre-prepared written agreements with fixed terms. That means the party signing it has had little to no opportunity to negotiate its terms. Many Employment Contracts and Supply Agreements tend to be standard form contracts.

With the definition of standard form contracts widening, courts will have more leeway in deciding whether an agreement is a standard form contract or not; and if UCT laws and penalties apply.

So, What’s An Unfair Contract Term?

Unfair contract terms are clauses in a contract that:

• Are not reasonable or necessary in protecting a party’s interests
• Create a power imbalance between the parties
• If they were to be enforced, they would cause significant harm

Unfair contract terms are considered to be an illegal practice when used in standard form contracts with small businesses or consumers.

What Does this Mean For My Business?

The recent amendments have also broadened the definition of a small business. From November 2023, a business is considered small if they:

• Have less than 100 employees
• Earn an annual turnover of less than $10 million

This definition applies to your business, and the other party signing or accepting the agreement. These changes have been brought around with the aim of protecting small businesses from unfair practices. It will apply to all new standard form contracts and ones modified after 9th November 2023.

What Happens To Unfair Contract Terms From Now On?

Standard form contracts found to be using unfair contract terms will be declared void if the term is central to the contract. If not, then the part deemed unfair will be struck out of the contract.

The new laws also introduce heavier fines and penalties for the use of unfair contract terms in standard form contracts. This includes:

• Penalties of up to $50 million (or 3 times the value of the breach for companies)
• The fine can also be calculated by assessing 30% of the companies annual turnover when the breach was taking place
• $2.5 million for individual companies

What’s Next?

If you’re a small business using standard form contracts, then it’s a good idea to get your Contracts Reviewed by a legal expert to make sure you’re in the clear and to avoid the new heavy penalties.

Disclaimer: All content contained in this publication is intended to provide general information in summary form on legal and other topics, current at the time of first publication. The content does not constitute legal (or other) advice and should not be relied upon as such. You should obtain specific legal or other professional advice before relying on any content contained in this publication.