New legislation has passed to help protect small businesses from unfair terms in standard form contracts. The NSW Business Chamber is urging small business members to check new agreements reflect these changes and investigate if older versions require updating.

The type of contracts the bill, which passed on 12 November, pertains to is those when:

  •  at least one party is a business that employs fewer than 20 people
  •  the upfront price payable under the contract is: 

- $300,000 or less

- $1,000,000 or less (if the contract is for more than 12 months)

  •  the contract is a ‘standard form’ contract for the supply of goods or services or grant of an interest in land.

To be classified as ‘unfair’ a term needs to:

  • suggests a significant imbalance in the parties’ rights and obligations
  • is not necessary (within reason) to protect the legitimate interests of the benefited party
  • causes detriment (financial or otherwise) to the other party.

The new legislation will be particularly focused on ‘unfair’ terms relating to varying or terminating of such contracts and anything to do with assigning a contract without consent.

If deemed unfair the said term will be void or not binding on parties to the contract. The rest of the contract will continue to bind the parties if it is capable of operating without the unfair term.

If unsure which contracts the legislature changes relate to, the NSW Business Chamber, as part of membership, run a free, legal advice line on 13 29 59. For anyone wishing to talk in more depth on the matter, fixed price legal services are also available.

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