New laws extending the protections against unfair contract terms to small businesses will come into effect next month. Is your house in order?
The new laws will be relevant to brokers if you have clients who are small businesses, that is, one with less than 20 employees.
This means that it’s time to dust off that standard form terms of engagement you have with your client and review it.
- Do the terms cause a significant imbalance in the parties’ rights and obligations under the contract?
- Would they cause detriment (financial or otherwise) to a party if they were to be relied on?
- Are they reasonably necessary to protect the legitimate interests of the party who would be advantaged by them?
Otherwise, if a term in a contract is unfair courts will be able to make orders against a business, for example, declaring all or part of a contract void, or refuse to enforce some or all of the terms of the contract.
The new laws will come into effect on 12 November 2016.
NIBA strongly recommends all members review their contracts with small business clients, preferably with the assistance of their legal adviser. You might also want to check out ASIC’s guidance on these new laws.