With all the focus on Covid, it’s good to see that major reform efforts are still underway. Last week the Morrison Government released the Bill to ‘beef up’ the unfair contract laws. It’s a ripper. It’s a game changer.
In 2015 the Coalition government passed unfair contract laws for small business people. As Self-Employed Australia was the primary, often the only, advocate for the laws (we campaigned for seven years) the laws achieved about 70 per cent of what we wanted. This new law will make the laws really strong.
The new Unfair Contract Bill
The Exposure Draft Bill has been negotiated with and supported by the states. It applies both to consumers and small business people.
The Bill Expands the definition of small business to businesses of up to 100 employees. Currently it’s only 20 employees. The Bill applies no limit on the value of the contract. Currently it’s only contracts to $300K. Plus the Bill clarifies what is a ‘standard form’ contract to one where the contract has been used before.
The Bill also expands the scope of Court Orders. If a clause is declared unfair in one contract, it will be unfair in all contracts. Fines can be imposed for using unfair clauses. A person can be banned from ‘managing a corporation’ for using unfair clauses.
The Bill gives real teeth to the laws. Big businesses and their managers will be in major trouble if they try to use unfair contract clause under this proposed legislation. It truly will make for a greater power balance between big businesses and consumers/small businesses.
Bank of Queensland slapped down
Take this example: The Bank of Queensland (BOQ) has known about unfair contract laws for six years. They were dumb if they didn’t! Yet they ignored the laws. The Federal Court has now slapped down BOQ. They had clauses in small business contracts that (1) let them change contracts at their whim, (2) allowed BOQ to declare a default anytime, (3) allowed BOQ to charge customers for BOQ negligence and (4) forced the customer to disprove a debt if BOQ declared a debt. These are all bastard clauses that have now been removed by court order.
But under the new Bill, BOQ and their managers would be in real trouble for having these unfair clauses. Their executives, lawyers and managers could face been banned from being a manager in banking or any corporation. Are you listening big business managers? Now it’s serious.
The Bill is subject to further consultation. We’ll be putting in a submission of STRONG support. Here’s our summary of the Bill.