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Small business to inform government on unfair contracts

The government is seeking feedback from small businesses on new protections guarding them against “unfair contract terms” imposed by larger players.

Small business minister Bruce Billson has warned that smaller operators are often forced to sign up to standard form contracts on a “take-it or leave-it basis”.

Mr Billson said that small business owners had little bargaining power and were sometimes forced to enter into disadvantageous contracts for a wide range of transactions. He added they often lacked the resources to “navigate” the contracts or negotiate around their undesirable provisions.

However, the government is now considering a new law allowing a court to cancel out the “unfair” terms within that contract if it unreasonably disadvantages a small business.

On Friday the government released a discussion paper with state and territory consumer affairs ministers requesting feedback from stakeholders by August 1. Small business owners are now being encouraged to detail their own experiences with unfair contracts.

“Sometimes these contracts contain unfair terms that increase the cost of doing business and undermine trust, which is vital to business relationships,” Mr Billson said.

“Getting the balance right between protecting small businesses against unfair contract terms, while at the same time not imposing unnecessary burden on business will be an important consideration in this consultation.”

The Independent Contractors’ Association has long urged the government to remedy unfair contract terms imposed on smaller business. Often the unfair terms allow the larger business to change the contract at short notice or the rate of pay owed to the individual.

Peter Coventry is a former Wendy’s franchisee who is currently engaged in a dispute with the well-known ice-cream chain over the closure of two of his stores in February 2012 and August 2013 in the Northern Territory.

Mr Coventry welcomed the government’s initiative and said there were a number of areas in which franchisees were often at the mercy of contracts that had been negotiated for them by the franchisor. He cited lease agreements and the renewal of franchise agreements.

“It is more often the case than not that the franchisor has the contract for the lease with the landlord — be it a shopping center or a strip location. Now the terms and conditions of that lease are between the landlord and the franchisor and usually made to the exclusion of any participation by or knowledge or attendance of the franchisee,” he told Dynamic Business.

“There’s a lot of terms in the franchise agreement upon renewal which say that if the franchisee advises that they’d like to renew their franchise term then they just enter into (agreeements)… which may contain terms which are different form the franchisee’s current agreement.”

Mr Billson has previously cited examples of unfair contract terms where smaller players have been forced to purchase equipment, only to sell that equipment back for a price lower than what they purchased it for.

The recent budget included an allocation of $1.4 million to extend unfair contract protections from consumers to small business owners.

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Joe Kelly

Joe Kelly

Joe Kelly is a writer for Dynamic Business. He has previously worked in the Canberra Press Gallery and has a keen interest in business, the economy and federal policy. He also follows international relations and likes to read history.

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