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Small businesses with up to 100 employees will now have stronger protections against unfair contract terms, as the government looks to beef up the courts’ powers to impose civil penalties on offending businesses.
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Unfair contract terms set to be outlawed under new bill
24 August 2021
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Draft legislation released by the Treasury on Monday has revealed that the government will go ahead with plans to outlaw unfair contract terms by providing the courts with the power to impose a financial penalty against a party who proposes, applies or relies on an unfair contract term when dealing with a small business contract.
The changes come after consultation with the industry revealed that unfair contract terms remain prevalent in standard form contracts that are often offered on a “take it or leave it” basis.
ACCC chair Rod Sims had previously called for unfair contract terms to be made illegal after finding that it continued to be a core issue for small businesses.
The new bill, which is currently open for further consultation, will expand protections to cover more businesses by expanding the definition of a small business to include a business that has fewer than 100 employees or an annual turnover of less than $10 million.
The courts will also have the power to determine an appropriate remedy where a term has been declared to be unfair, in addition to the current law where unfair terms are automatically voided.
Terms that have been declared to be unfair in a specific proceeding will also be presumed to be unfair if they appear in other contracts within an industry.
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The rebuttable presumption is intended to encourage contract-issuing parties to maintain thorough monitoring and record keeping of their contracts to ensure that unfair terms are removed from or not included in standard form contracts.
Assistant Treasurer Michael Sukkar said the proposed reforms to the Australian Consumer Law and the Australian Securities and Investments Commission Act 2001 would help improve consumer and small business confidence when entering into standard form contracts.
Public consultation on the exposure draft legislation and explanatory materials will close on 20 September 2021.
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