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Image of paperwork with the caption 'Are your contracts fair? Tips to help you identify and manage unfair contracts"

Did you know that your average Australian small business signs eight standard form contracts per year? Which is why it’s so important to know your rights when entering into a standard form contract, or providing a contract to others.

While protection for consumers entering into a standard form contract has existed for many years, in 2016 similar protections were introduced for small business owners with fewer than 20 employees.

What’s a standard form contract?

In general terms, a standard form contract is one that has been prepared by one party while the other party has little or no opportunity to negotiate the terms. It’s effectively offered on a ‘take it or leave it’ basis.

If a dispute arises, an agreement is assumed to be a standard form contract, unless the party that prepared it can prove that it’s not. Ultimately, only a court or tribunal can decide that a term is unfair.

What’s an unfair contract term?

The law sets out examples of terms that may be deemed ‘unfair’, including where only one party:

  • holds all, or the majority of power under the contract
  • can terminate the contract
  • is penalised for breaching or terminating the contract
  • can vary the terms of the contract

How do I spot an unfair contract?

Look out for these types of potentially unfair terms:

  • of automatic renewals binding you to subsequent contracts unless you cancel the contract within a certain timeframe
  • that allow the larger business to increase its prices or alter the terms and conditions of the contract without consulting you first
  • that limit the other party’s liability towards you
  • that allow the larger business to cancel or terminate your agreement without cause

What should you do if you’re offered an unfair contract to sign?

If you think a contract term is unfair, ask the other party to amend or remove it. If they won’t, contact our free business advisory service for help or seek legal advice. You can also contact the ACCC’s small business helpline 1300 302 021 or visit their website to find out more.

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