Assistant Treasurer Michael Sukkar has announced that Commonwealth and state and territory governments have agreed to make unfair contract terms unlawful and give courts the power to impose a civil penalty when a breach occurs.
This nationwide agreement aims to strengthen the protection of small businesses against unfair contract terms and impose heavier penalties against the big businesses who are practising this now unlawful act.
The move has earned the praise of Australian Small Business and Family Enterprise Ombudsman Kate Carnell who said, “The government has clearly listened to the concerns my office has long held in relation to the impact of unfair contract terms imposed on small businesses by big businesses. Importantly these reforms will ensure unfair contract terms are illegal and the courts will have the power to levy penalties for breaches.”
The ASBFEO also welcomed the expansion of the definition of small business to under $10 million turnover or up to 100 employees, a change that will bring 99 per cent of Australian businesses within the scope of the unfair contract protection.
“The removal of the requirement for a contract to be below a certain threshold also represents significant progress for small businesses,” Carnell said.
However, the Ombudsman did sound one note of caution.
“While these reforms do offer small businesses more confidence to enter into a contract with a larger business, it is disappointing that unfair contract terms will still need to be decided by the courts,” Carnell said.
“This has proven to be a significant barrier for small business as pursuing legal action is a costly, stressful and time-consuming exercise. It’s also crucial these reforms apply to government contracts, which often impose unfair contract terms on small businesses.”
The ASBFEO reiterated her office’s recommendation to give regulators additional powers to penalise businesses found to have imposed unfair contract terms on a small business.
“We look forward to seeing draft legislation to ensure these necessary reforms come to fruition as a matter of urgency,” Carnell concluded.
