Unfair Contract Terms

Unfair Contract Terms

Written by Eugene Reinboth

New legislation relating to contracts comes into effect on 12 November 2016.

The outcome is that any standard contracts entered into, varied or renewed on or after this date will have new obligations imposed on its terms.

The legislation will apply to contracts where:

  • it is for the supply of goods or services or the sale or grant of an interest in land;
  • at least one of the parties is a small business (employs less than 20 people) and/or
  • the upfront price payable under the contract is no more than $300 000 (or $1 million if the contract is for more than 12 months).

All contract terms must not be “unfair” and must be transparent, that is, expressed in reasonably plain language, legible, presented clearly; and readily available to any party affected by the term.

What if a term is found to be ‘unfair’? Then the unfair term will not be binding on the parties. The rest of the contract continues to bind the parties unless the unfair term makes that impossible.

Please review your standard contract terms and vary them, if necessary, so that they comply with the new requirements.  This will ensure that your contract terms remain binding.

For further information about whether a term in your contract is unfair, or if you have any concerns about your contracts, please contact Charlie Belperio or Eugene Reinboth from our commercial team on (08) 8212 1322 during office hours.

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