Small Business and Unfair Contract Terms Act 2015: What Small Businesses Need to Know
Small businesses often find themselves at a disadvantage when it comes to negotiating contracts with larger companies. The Small Business and Unfair Contract Terms Act 2015 was introduced to level the playing field and protect small businesses from unfair contract terms.
The Act applies to contracts entered into or renewed on or after November 12, 2016, where at least one party is a small business. It applies to contracts for the supply of goods or services, including financial services, and the sale or grant of an interest in land.
The Act is designed to prevent larger companies from using their bargaining power to impose unfair contract terms on small businesses. For example, a large company may try to include a clause that allows them to change the price or terms of the contract at any time without notice. This could be devastating for a small business that has relied on the agreed price and terms to plan their operations.
The Act provides a list of terms that are considered unfair when used in contracts with small businesses. These include:
– Terms that allow one party to change the price or other important terms of the contract without notice or justification;
– Terms that allow one party to vary the quantity of goods or services to be supplied without a valid reason;
– Terms that allow one party to terminate the contract without a valid reason and with inadequate notice;
– Terms that require one party to indemnify the other party for losses caused by the other party`s conduct;
– Terms that limit one party`s right to sue the other party; and
– Terms that require one party to pay a penalty for breaching the contract that is disproportionate to the other party`s loss.
If a court finds that a term is unfair, it will be struck out of the contract. The rest of the contract will remain in force, as long as it can still be effective without the unfair term.
Small businesses should be aware of their rights under the Act and take steps to protect themselves from unfair contract terms. This may include seeking legal advice before entering into contracts with larger companies, negotiating better terms, and closely reviewing any contracts that are offered.
In conclusion, the Small Business and Unfair Contract Terms Act 2015 is an important piece of legislation that levels the playing field for small businesses. It provides protection against unfair contract terms and gives small businesses the confidence to enter into contracts with larger companies. Small businesses should take advantage of this legislation to ensure that they are not taken advantage of in contract negotiations.