New laws mean that businesses cannot enforce “unfair” contract terms in standard form contracts against small businesses (like farmers).
For instance, being offered a contract on a “take it or leave it” basis is a good indication that you might have signed one of these contracts. If you have been put in this position, you may be able to remove the unfair term or renegotiate a replacement that is fair. If the other party refuses, you should consider seeking legal advice to determine your rights.
What is a small business?
A “small business” employs less than 20 people (including regular casual employees). For the law to apply, the contract must also have an “upfront cost” of less than $300,000, or $1 million if the contract is for a period of more than 12 months. An upfront cost is the amount that the consumer agrees to pay under the contract. This includes a once off payment, or a series of payments but does not include payments such as default or exit fees.
But is it unfair?
Look for terms that allow the other party (but not you) to:
- limit their obligations;
- terminate the contract;
- penalise you for breaching or terminating the contract (where they cannot be penalised); and
- vary the contract.
Can I avoid signing one of these contracts?
It is easier to avoid unfair contract terms right from the start—if you are a small business and are offered a standard form contract that contains an unfair contract term, consider bringing the issue to the attention of the other party. The other party may not have realised that the term was “unfair” and will likely want to avoid a contract containing unenforceable terms. If you can’t negotiate a fairer replacement term, consider getting advice on your options.
Read more about the new law here.
MinterEllison has strong agribusiness credentials, read more about our clients here and what we can do for you here.
Authors: Andrew Gill (Partner) and Anna Crowley (Lawyer) at MinterEllison, Canberra.