Can I renegotiate an unfair contract?

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Picture the scene. You’re a personal customer of a big company, and you think that the way your contract is worded is unfair. You think that the balance of rights within that contract is skewed towards the company. But the problem is that the contract is the standard one which is dished out to every single customer that the company signs up.

Up to now, whether you know it or not, there has been something you can do about it. These standard contracts are covered under Australian Consumer Law in what’s called the “unfair contract terms” (UCT) provisions. More of what exactly the UCT means, and what it covers, in a moment.

But how about your business? You run a small organisation, and you often deal with very big companies which have hundreds, if not thousands, of small companies on the books. The chances are that that company has a similar ‘standard contract’ which is used for companies like yours.

Of course, there are lots of big companies that deal with their smaller counterparts absolutely fairly. But unfortunately not all of them do. And the important thing to know is that, due to a recent change in Consumer Law, the UCT provisions also apply to small companies.

So in other words, if you run or work in a small business, and you’re subject to a ‘standard’ contract which you think isn’t fair, you can now do something about it.

What are the UCT provisions?
Let’s take a look at exactly what the UCT provisions are. There are a few key things to understand about them:

1. First and foremost, they only apply to standard form contracts. So in other words, if you’ve negotiated a bespoke agreement with a company, and you later think that you’ve got a bad deal, then this change is not going to help you. However, if you’re offered a ‘take it or leave it’ standard contract, the UCT provisions might apply.

2. Secondly, the change happened only recently, and applies to contracts that are entered into or renewed after 12 November 2016. You’re out of luck if your contract is dated before then, but put a reminder in your diary now for next time you renew it to see if it’s covered under the UCT provisions.

3. The contract is judged to be ‘unfair’ if it does three things:
• If it is found to cause a significant imbalance in the parties’ respective rights and obligations; and
• If it is judged to be ‘not reasonably necessary to protect the legitimate interests’ of the firm which stands to gain from it; and
• If it would cause ‘financial or other detriment to your company if it were to be applied.

For example, if you’ve got a contract that limits your company’s right to terminate it, that contract might fall under the UCT provisions. Likewise, if you’ve signed a contract which gives only one side the right to vary the terms without consulting the other, or add in additional terms, that might be judged to be unfair.

Do they definitely apply to me?
Remember, the UCT provisions only apply to standard contracts for the supply of goods or services or interests in land. Moreover, they only apply to individual consumers, and now to small businesses (which employ less than 20 people)  if the upfront contract price is no more than $300,000 (or $1 million if the contract lasts more than 12 months).

So if you think you’ve signed a contract which looks unfair, or you want some advice about dealing with bigger firms on standard contracts, have a chat with a lawyer today. And next time you’re about to sign a standard contract, remember the letters UCT!

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Samantha Siebel
Samantha brings more than 20 years of experience in top tier CBD law firms to Your Law Firm. She was named one of Australia’s Best Lawyers by the Australian Financial Review in 2012 and her Your Law Firm business is based in Prahran.

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