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Fair Dinkum – New unfair contract term protections come into effect

As anticipated, new laws have recently commenced that allow small business to challenge the validity of unfair terms in standard form business-to-business contracts.

The new laws will apply to any new contracts, or renewals or variations of existing contracts on or after 12 November 2016, where:

  • the contract is a 'standard form contract' - which is a contract that is essentially presented on a 'take it or leave it' basis and not subject to negotiation (except as to terms like price and the specification of goods/services). There is a presumption that a contract is a standard form contract unless proven otherwise; and
  • one party to the contract is a 'small business' - which is defined to be an entity with less than 20 employees (includes casual employees if they are employed on a regular and systematic basis); and
  • the 'upfront contract price' is less than $300,000 or, if the contract is longer than 12 months, $1 million. The upfront contract price includes any amounts that can be calculated at the commencement of the contract and excludes any amounts contingent on other events.

As many businesses operating in the agricultural sector are considered to be small businesses, the new laws are likely to apply to many standard form contracts you enter into, including contracts for the supply of equipment or produce.

Such operations should think carefully when entering into a contract that may fall within the scope of the new laws.

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.

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