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are not to be counted for this
purpose unless they are employed
by the business on a regular and
systematic basis; and either:
–– The upfront price payable
under the contract is less than
$300,000; or
–– If the contract has a term of more
than 12 months, the upfront price
payable is less than $1,000,000.
Small business
In determining whether a business
employs less than 20 people, casual
employees are counted if employed
on a regular and systematic basis.
Upfront price
Upfront price is the consideration that
is provided for the supply, sale or
grant under the contract, and which
is disclosed at or before the contract
is entered into. The upfront price does
not include any amounts that are
contingent on the occurrence or non-
occurrence of particular events (such
as royalties).
In determining the upfront price
payable where credit is provided, any
interest payable is to be disregarded.
Exempt contracts
A small business contract will not be
covered by the new provisions where
the contract is subject to a prescribed
industry-specific law that have been
deemed enforceable and equivalent.
No existing industry-specific laws
yet been deemed to have sufficient
protections in order to be exempt
under the new legislation. Current
measures in certain industry-specific
mechanisms, such as the Franchising
Code of Conduct, go some way to
addressing the concerns of small
businesses by providing for disclosure
mechanisms and good faith conduct.
However, the current mechanisms are
not as broad as the general prohibition
on unfair contract terms and are
thus not likely to be “equivalent”.
Therefore, the new legislation applies
to franchising agreements.
Small business contracts that are
the constitution of a company,
management investment scheme or
other kind of body will also be exempt
from the new provisions.
When will the legislation
commence?
The legislation will come into effect on
12 November 2016.
The unfair contract terms will apply
to small business standard contracts
entered into after that date. However,
the provisions will also apply:
(a) if the contract is renewed after
that date; or
(b) if a term of a contract is varied
after that date, to the varied term.
The impact
There is quite some uncertainty as to
when the legislation will apply in any
given circumstance.
The drafting of the legislation means
that businesses may not know
whether the regime applies without
enquiring into the head count of their
potential small business counter-party.
The definition of “upfront price” may
also cause uncertainty where the
structure of the payments make it
difficult to determine the exact amount.
These uncertainties may dissuade
businesses from reviewing and
revising their standard form contracts.
However, there is one very good
reason for businesses to do so. In
its media release announcing the
extension, the Government stated
that it has provided $1.4 million
to the Australian Competition and
Consumer Commission to ensure
business compliance. Further, the
ACCC has indicated in its Compliance
and Enforcement Policy that the unfair
contract terms regime under the ACL
will be a specific area of focus in the
coming year.
Businesses should review their
standard form contracts to, at the
least, temper the most egregious
provisions particularly in circumstances
where they are rarely, if ever,
relied on. Alternatively for some
agreements, businesses may look to
start negotiating their terms to avoid
the application of the regime (though
proper records of such negotiations
should be maintained).
Either way, the Government may well
achieve its stated goal of addressing
the imbalance of risk allocation in these
type of agreements.
SUPPORTING INDUSTRY
GROWTH THROUGH
CURTIN IGNITION
Would you like to receive a scholarship to the Curtin Ignition Program?
Wrays is supporting two potential participants through the Wrays Scholarship.
To find out more, contact
Applications open on June 1st and scholarships
are available.
Sponsored by Wrays, the Program is run by the
Curtin Centre for Entrepreneurship and is based
on the successful Ignite Program managed and
delivered by the University of Cambridge Judge
Business School’s Centre for Entrepreneurial
Learning (CfEL).
Curtin Ignition is suited to founders of early
stage, high-growth business ventures, and
people with new ideas that have potential to
become high-growth, worldwide businesses.
The Program comprises of a blend of keynote and
workshop teaching sessions, small group
mentoring, panel, clinic and networking sessions.
Delegates prepare a 10-minute business plan
pitch over the course of the program, which they
deliver to an expert panel and receive feedback on
the last day of the program. All delegates must
have a viable concept for a new business or an
established early stage venture.
The Program runs from Sunday September 4
through to Friday September 9 at Technology Park
Function Centre in Bentley, Perth.
Curtin Ignition is an intensive 5½-day education program for aspiring
entrepreneurs, academics and corporate innovators to trial and prepare their
business ideas for the commercial environment.