This note updates the small business unfair contract terms protections transition and gives details on the role of the new Small Business and Family Enterprise Ombudsman.
Small business unfair contract terms
On 12 November 2015, the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 received Royal Assent. The new law will come into force on 12 November 2016 following a 12 month transition period.
Under the new law a small business will be able to have an unfair term in a contract declared void by a court if, at the time of agreeing to a standard form contract, it had fewer than 20 employees and the contract did not exceed $300,000 (or $1 million for contracts longer than 12 months).(Background).
ASIC has published Information sheet Unfair contract term protections for small businesses (INFO 211) about the new law.
The information sheet sets out ASIC’s expectations that prior to 12 November 2016, businesses will review their standard form contracts.
It also gives examples of loan contract terms that may raise concerns under the unfair contract terms law.
Separately Treasury is consulting on whether certain contracts should be exempted from the new laws on the basis that those contracts are subject to equivalent and enforceable protections under another law.
The protections currently do not cover:
•insurance contracts regulated under the Insurance Contracts Act 1984 (e.g. home insurance, car insurance etc)
•the constitutions of companies, managed investment schemes or other kinds of bodies.
Australian Small Business and Family Enterprise Ombudsman
The Assistant Treasurer has announced the appointment of Kate Carnell AO as the inaugural Australian Small Business and Family Enterprise Ombudsman. Ms Carnell will commence the new role on 11 March for a five year period.
The role is to provide both advocacy and assistance for small business.
The functions and powers of the Australian Small Business and Family Enterprise Ombudsman are set out under the Australian Small Business and Family Enterprise Ombudsman Act 2015.
It is not clear how the Ombudsman will interact with FOS and CIO. However the announcement describes the Ombudsman acting as “concierge for dispute resolution service” and the Act gives her the power to recommend an alternative dispute resolution process by recommended alternative dispute resolution providers.