Business-to-business deals excluded from unfair contract laws

The Rudd Government has announced business-to-business deals will be excluded from new laws banning unfair contract terms in standard-form contracts.

Consumer Affairs and Small Business Minister Craig Emerson announced the exclusion yesterday as the Government’s new national consumer law bill was introduced into parliament yesterday.

The ban on unfair contract terms, which is due to start in January 2010, was designed to protect consumers from issues such as unfair exit fees, penalty fees and clauses that permit one party to unilaterally change or cancel a contract.

But business groups were concerned that businesses would be exposed to the changes, both with customers using standard contracts and suppliers offering standard contracts.

Franchisors were particularly concerned, as they often rely on contract terms that stipulate a franchisor can change the business model if and when they decide. Under the new legislation, these typical contract terms could be deemed “unfair”.

But while the Government’s sudden backflip has business breathing a sigh of relief, Emerson has signaled that he will continue to investigate the issue in relation to business-to-business transactions.

“In relation to business-to-business contracts, the Government is currently reviewing both the unconscionable conduct provisions of the Trade Practices Act and also the Franchising Code of Conduct,” Emerson said in a statement.

“Since these reviews relate to business-to-business contracts, the Government will consider the issue of business-to-business standard form contracts when these reviews are complete.”

Corinne Attard, special counsel for law firm HWL Ebsworth, has told Franchising.net that businesses may still need to consider reviewing their standard-form contracts.

“While it looks like franchisors can all breathe easy again about their franchise agreements being attacked by this new law for the moment at least, it looks as if the Government has decided to continue its inquiry into the review of the Code and unconscionable conduct,” said Attard.

“For those businesses who enter into standard form contracts with consumers however, the unfair contract terms laws remain something to watch and to consider in reviewing those contracts.”