The Australian Competition and Consumer Commission is urging businesses in the agriculture sector to review the standard form contracts that are provided to farmers and other small businesses.
From 12 November 2016 a new law comes into place that will protect farmers and small businesses from unfair contract terms.
“Many small businesses entering into contracts with larger businesses have no option but to accept all the terms of the standard form contract that they are given. However, this new law will allow the courts to strike out any contract terms that unfairly benefit one party over the other,” ACCC Commissioner Mick Keogh said.
“Imbalances in bargaining power are particularly common in agriculture supply chains and the ACCC wants farmers to be aware of these new protections, to ensure they get a fair deal when entering into a standard form contract with a larger business.”
“The ACCC will be working with agriculture businesses and those that supply goods or services to the sector to promote compliance with the law,” Mr Keogh said.
The ACCC has also developed educational videos to explain business rights and obligations under the new law.
The law will apply to a standard form contract entered into or renewed on or after 12 November 2016. If a contract is varied on or after 12 November 2016, the law will apply to the varied terms.
Contracts covered include those between businesses where one of the businesses employs less than 20 people and the contract is worth up to $300,000 in a single year or $1 million if the contract runs for more than a year.
Standard form contracts provide little or no opportunity for the responding party to negotiate the terms – they are offered on a ‘take it or leave it’ basis.
The law sets out examples of contract terms that may be unfair, including:
- terms that enable one party (but not another) to avoid or limit their obligations under the contract
- terms that enable one party (but not another) to terminate the contract
- terms that penalise one party (but not another) for breaching or terminating the contract
- terms that enable one party (but not another) to vary the terms of the contract.
Only a court or tribunal (not the ACCC) can decide that a term is unfair. However, if a court or tribunal finds that a term is ‘unfair’, the term will be void – this means it is not binding on the parties. The rest of the contract will continue to bind the parties to the extent it is capable of operating without the unfair term.
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