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The government is set to outlaw unfair contract terms for small businesses after finding that current protections continue to be inadequate.
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Government strikes deal to outlaw unfair contract terms
10 November 2020
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Assistant Treasurer Michael Sukkar has announced a new agreement with state and territory consumer affairs ministers to making unfair contract terms unlawful and give courts the power to impose civil penalties.
The reforms will also expand the definition of a small business to include a business that has fewer than 100 employees at the time the contract is entered into, or has an annual turnover of less than $10 million.
The requirement for a contract to be under a certain threshold to be considered a small-business contract will also be removed.
The Treasury will now develop draft legislation that will expand on details of the reforms and provide stakeholders the opportunity to comment on.
“Evidence gathered through public consultation indicates that unfair terms remain prevalent in standard form contracts and there is uncertainty around the scope of the existing protections,” Mr Sukkar said.
“These reforms will improve consumer and small business confidence when entering into contracts.”
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Australian Small Business and Family Enterprise Ombudsman Kate Carnell said the national agreement was welcome news and represented significant progress for small businesses.
“The government has clearly listened to the concerns my office has long held in relation to the impact of unfair contract terms imposed on small businesses by big businesses,” Ms Carnell said.
“Importantly, these reforms will ensure unfair contract terms are illegal and the courts will have the power to levy penalties for breaches.”
However, Ms Carnell believes pursuing penalties through the courts could be burdensome to small businesses.
“While these reforms do offer small businesses more confidence to enter into a contract with a larger business, it is disappointing that unfair contract terms will still need to be decided by the courts,” Ms Carnell said.
“This has proven to be a significant barrier for small business as pursuing legal action is a costly, stressful and time-consuming exercise.
“That’s why my office continues to recommend giving the regulators additional powers to penalise businesses found to have imposed unfair contract terms on a small business.
“We look forward to seeing draft legislation to ensure these necessary reforms come to fruition as a matter of urgency.”
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