New rules protect small business against unfair contracts
In September 2015 and November 2016, we wrote about changes to the Australian Consumer Law, which extended unfair contract protection to small businesses.
The new law is still in its infancy, but there has already been a case in which a contract was found to be unfair and therefore void under the amended rules.
In Base Coast Resort Pty Ltd v Success Resources Australia Pty Ltd*, Base Coast booked a seminar through Success Resources in November 2016, which was to be presented in Melbourne in January 2017.
Success Resources later advised Base Coast that the Melbourne event had been postponed to a date to be confirmed in 2017, but offered the course in Sydney.
The dispute arose when Base Coast declined the alternative venue and Success Resources refused to refund the $3,995 already paid by Base Coast for the seminar. Success Resources relied on clause 3 of the contract, which stated that Success Resources “may change the Speakers, the Hours, the Dates and/or the Location of the Seminar Services for any reason by notifying [Base Coast] in writing of the change and detailing substitute Speakers, Seminar Hours, Dates and/or Location”.
Deputy President Ian Lulham found that clause 3 of the contract was an example of “pure drafting overreach”, the contract unjust and Success Resources in breach of the Australian Consumer Law.
In ordering Success Resources to repay the $3,995, Deputy President Lulham stated that terms in small business contracts are void if they:
- “cause a significant imbalance in the parties’ rights and obligations;
- are not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the terms; and
- would cause significant detriment to [the other] party”.
If you are a small business owner and feel that the other party to a contract you’ve signed is taking advantage of an overly favourable term, contact our Litigation + Dispute Resolution team to find out if the Australian Consumer Law protects you.
Conversely, if you’re worried that a court would consider your standard terms and conditions ‘unfair’, our Litigation + Dispute Resolution team can help increase the enforceability of your contracts.