Small businesses safeguarded against unfair contract terms


Small businesses will be safeguarded against unfair contract terms under Labor’s proposed legislation to make them illegal.

Large businesses could face hefty fines of up to $10 million for contracts that contain unfair terms such as, unreasonable ability to end an agreement and allowing the contract provider to solely vary all terms.

A joint statement released on Friday by Shadow Minister for Small Business Chris Bowen, Shadow Assistant Minister for Small Business Madeleine King, and Shadow Minister for Competition and Productivity Andrew Leigh said that Australia’s current laws weren’t tough enough.

“While contracts terms that unfairly exploit a power imbalance between the two parties can be voided by a court, there’s no punishment for the entity exploiting its market power. This means there’s nothing discouraging the big end of town from pushing smaller dependent firms to sign onto unfair arrangements,” the statement said.

If elected, Labor promises to make unfair contract terms illegal, which according to the Australian Competition and Consumer Commission ‘…would act as a better deterrent. In the ACCC’s view, currently there is minimal incentive for businesses to comply with (unfair contract term) laws.’

Currently, there are no penalties or deterrents for including unfair contract terms into contracts.

“Australia’s small businesses need smart reforms to ensure that they aren’t pushed around by the big guys,” the statement said.