Stand Up: Protect Your Small Business From Unfair Contract Terms

contract signing

Small businesses can be vulnerable to unfair terms, and sometimes they need a lawyer who can help them check the terms and conditions before they sign any agreement. Larger operations could sometimes offer terms that might not be advantageous to smaller companies, but a lawyer could help these SMEs get a better deal where they will not get the shorter end of the stick. But how would a smaller company recognize an unfair deal?

What Are Unfair Contract Terms

First of all, you need to recognize are unfair terms for your business. If you have little to no experience in a business or industry, you will likely become a victim of an unfair contract. There are several signs that you have to be aware of what can be unfair for your company.

While a court or a tribunal is necessary to declare a term unfair, they do follow rules. If a term on your contract is one of the following, then it will have a good chance of being declared unfair by the court. For one, if it creates a major imbalance between the two parties’ rights and obligations. For example, if your business enters into a contract with a supplier of parts and the contract states that you have no right to a refund. That means you have fewer rights than you normally would.

Additionally, if the term in the contract is not necessary to protect the interests of the party receiving the advantage. For example, if the company you made a deal with to transport your products puts in a term of limited liability in case of accidents on the road. Considering that the accidents can be the result of driver carelessness, this term protects the company too much.

Finally, a contract term can be unfair if it causes delays or economic detriment to your business. This is notable in terms where the fees are too high or give too much leeway for the other party. For example, if the contract allows a supplier to delay their shipments too much.

How the Law Protects You

If you think you are on the losing end of a bad contract, then there is something that you can do about it. For example, in Australia, they have the Australian Consumer Law (ACL) and the Australian Securities and Investment Commission Act (ASIC Act). These laws made some changes that allowed small businesses to experience the same protections that individual consumers had against unfair contract terms.

There are several requirements for a business to receive this kind of protection. First, the contract needs to be have been entered into or renewed after November 2016. Second, your business needs to qualify as a small one. This means that you have less than 20 employees. The contract payment also needs to not exceed $30,000 or $1 million if the contract is for a year.

Finally, the contract needs to be a standard form contract. These contracts are the sort that one party gives the other party to sign with no negotiation. Most small businesses cannot help but sign the contract because of various circumstances. If you had the chance to negotiate, then the contract is not a standard form one. You can head off the problem of an unfair contract by doing your due diligence and negotiating.

Bring in a lawyer and go over the contract so that you know all the details. You can then compare it to others before you put your signature on it. This ensures that you get a good deal.

What You Can Do

business partner shaking hands

If you do sign an unfair contract, there are several things you can do. The first option is to always discuss it with the other party. If you cannot agree to a new contract, you need to report it or seek legal advice. In a country like Australia, this will usually end in a court hearing to determine whether the contract is unfair.

There are several ways in how it could end if taken to court. One is that the court feels that the contract is fair and it will take no action. Another result could be an injunction to prevent the term from happening. The court can also require the other party to compensate for the small business. Other results depend on the decision of the court.

When you deal with contracts as a small business, you need to learn to take care of yourself. Read contracts before signing and ensure that you have solid legal help when you need to report an unfair contract.

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