Next week, changes will be made to Australia’s unfair contract regime that will greatly expand its reach and scale of applicable penalties. Currently, under the Australian Consumer Law (ACL), if a term in a small business contract is found to be part of a standard form contract and is unfair, that term will simply be void. However, the new regime will provide for an additional pecuniary penalty of $2.5 million for individuals, or a minimum of $50 million for body corporates.

Currently, a small business is one that employ fewer than 20 people. On 10 November 2023, the definition will cast a wider net to include businesses that employ less than 100 people or have less than $10 million in annual turnover. But what is a standard form contract? The new regime provides that it is typically one prepared by one party to the contract and not negotiated between parties, ie offered on a “take it or leave it” basis, regardless of the fact that minor or insubstantial changes were negotiated or if a party had the opportunity to select a term from a range of options determined by the other party.

Unfair contract terms, as defined by the ACL, are clauses that create a significant imbalance between the parties’ rights and obligations, leaning heavily towards the party drafting the contract. Terms can also be considered unfair if it is found to not be reasonably necessary in order to protect the legitimate interests of the party advantaged. Such terms can include, but are not limited to, terms that unilaterally terminate or vary an agreement, such as increasing the price of services in certain situations. One might wonder, why is this relevant to the agribusiness sector? The answer lies in the unique dynamics of farming relationships. Agreements in this industry often involve long term commitments, substantial investments, and a delicate balance between the unpredictability of nature and the demands of the market. Unfair contract terms can disrupt this delicate equilibrium, posing a threat to the livelihoods of those who dedicate their lives to feeding the nation.

In conclusion, the awareness of unfair contract terms is not just a legal obligation; it is a shield that agribusiness entrepreneurs must wield to protect their interests and ensure the sustainability of their Operations. By fostering transparency and fairness in contractual dealings, agribusinesses can fortify themselves against the unseen challenges that may lurk within the fine print. In the fields, as in contracts, a well-nurtured foundation yields the most bountiful harvests.

If you are unsure if your contracts fall foul of the new regime, contact us for a chat.