Get ready for a profound disruption to some core big business operations in Australia. And this is great for small business people, consumers and (believe it or not) big business as well.
The Albanese government has committed to introducing new unfair contract legislation in the current parliamentary sitting period. Labor promised this in 2019—a pledge we totally endorsed. We again strongly endorse this move by Labor.
We campaigned for seven years for the unfair contract laws for small business and achieved these in 2016. But the laws have proven to be too weak.
Australia’s unfair contract laws are arguably the world’s first (and in global terms possibly the only) laws that have addressed the issue of bad standard form contracts in a holistic way. The laws were introduced for consumers in 2010 and extended to small businesses in 2016. Insurance products were included in 2021.
Why the laws
Some lawyers say unfair contract laws are wrong because they override the principle that a contract once entered into is set in concrete, even if it disadvantages one party. This is a perverted view of contract. The Australian unfair contract laws effectively codify in statute the elements under common law that make a commercial contract a proper contract.
As examples, unfair contract laws hold that if a standard form contract enables one party but not the other to unilaterally change the price of a contract, or cancel a contract or change its terms, then the contract is ‘unfair’.
Why the need to ‘beef up’
The Australian Consumer and Competition Commission has been responsible for enforcing the unfair contract laws. Since 2016, the ACCC, with then chair Rod Sims at the helm, has consistently expressed frustration at big business ignoring the laws.
Until now, unfair contract terms could only be ‘voided’. There were no penalties for their use. Unfair contracts could only be sanctioned after they had done harm. This enabled ‘let’s screw people over’ big businesses to laugh off the laws.
To his credit, Rod Sims led the charge for a ‘beefing up’ of the laws. A ‘beefed up’ Bill was presented to Parliament earlier this year. It is this Bill that the Albanese government has as a template for making unfair contracts ‘illegal’.
If Albanese implements the template Bill, unfair contracts will be illegal with civil penalties of up to $100,000 for individuals and $10 million for corporations. A court will be able to make an order if it thinks there might be a loss. In other words, harm can be prevented before it occurs. Other provisions give real bite to enforcement.
Further, the current $300,000 threshold for the size of a contract subject to the laws is being removed. The size of a small business is being lifted from 20 to 100 employees.
On any assessment this is a major economic reform. It will protect consumers. But just as importantly, small businesses will discover a new level of equality of power with big businesses as both buyers and sellers of goods and services. Australia’s 1.3 million self-employed sole traders will have protections from bullying clients that they have never had before.
It’s a huge step forward.
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