Protection for small businesses from unfair contract terms

New legislation has been approved this month to protect small businesses from unfair contract terms. From the date the law comes into effect, any unfair term in a "standard small business contract" may be deemed void by a court or the NSW Civil and Administrative Tribunal.

What is an unfair term in a standard small business contract?

Australian Consumer Law provides that a term of a small business contract is unfair if it:

• would cause a significant imbalance in the parties' rights and obligations arising under the contract; and
• is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
• would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.¹