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Better protection from unfair contracts for small businesses afoot Robert Williams*

How many times have you been in discussions with a larger or more powerful supplier or customer and been presented with a one-sided contract and told that if you want the business you have to agree to it? Particularly if you are a small or medium-sized business in Australia, the reality is that this will happen regularly.

A

ustralia’s competition law (the Competition and Consumer Act 2010), is much like the law of the jungle — it is about survival of the fittest, rather than ensuring the survival of particular competitors. Because of this, our competition law does not generally focus on the micro level in terms of a supplier imposing onerous obligations on a particular customer or a customer imposing onerous obligations on a particular supplier. Over the years, this has left many small businesses forced to live with obligations that are one-sided and quite unfair. Under the Australian Consumer Law (which is part of the Competition and Consumer Act 2010) small businesses 12

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have some protection from “unconscionable conduct”. The general picture that emerges from various court cases is that the conduct has to be really over the top before the court is likely to act. From a practical perspective, one of the problems that has arisen is over the word “conduct”. The courts view it as not covering the actual wording in a contract, but rather restricted to the manner in which the contract is obtained, or the way in which the contract is used later on against the weaker party. This means the unconscionable conduct provision does not look at specific terms of the contract in isolation and say that they are too unfair to be allowed to remain.

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