Australia—It has been 12 months since new Unfair Contract Terms laws were introduced by the federal government. These laws aimed to help small business who often lacked the resources and bargaining power to negotiate terms in standard form contracts with powerful entities. Penalties were also introduced for companies found to have put unfair terms into their contracts.

According to Dentons Partner Robyn Chatwood, there is a raft of issues with the new laws which “are catching people out unexpectedly”.

According to Ms. Chatwood, one of the problems, is that the law does not define what should be clearly articulated: what a standard form contract is and what an unfair contract term is. The issue with this, she explains, is that much of the law is ‘context specific’, meaning each circumstance needs to be assessed individually.

“This type of red tape makes it very costly to do business.”

Another issue is the sheer volume of enterprises that may fall within the category of small business.

The ambiguity stemming from this has led to “significant uncertainty” for businesses because the laws are simply very hard to comply with.

“It’s disappointing to see that despite the intention of the laws, they are still fiendishly technical and difficult, catching out many, including the small businesses they seek to protect and protecting some larger businesses which is not the aim of the law. Businesses need expert legal advice to navigate the complexities, which is not often feasible.”

“We’re seeing significant uncertainty for businesses because the laws are so hard to comply with,” she continued.

Another issue is the sheer volume of enterprises that may fall within the category of small business who are protected by the law from unfair contract terms. Over 90% of businesses in Australia have an annual turnover of under $10 million or employ under 100 employees. Even small businesses proposing their own form of standard form contracts to large businesses may need to comply with these laws in some circumstances – which does not seem consistent with policy aim.

Ms. Chatwood is advocating for updates to the laws and called on the Australian Competition and Consumer Commission to provide more practical guidance. “Unfair Contract Terms laws as they currently stand are not serving their purpose. Businesses need more certainty in the laws themselves, as well as practical guidance to save costs, cut red tape and lower their risks.”

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