Contract overhaul for small businesses to affect transport

Both the big and small ends of the transport sector will likely be affected by changing rules for contracts with small businesses

Contract overhaul for small businesses to affect transport
Contracts involving small businesses will be under greater scrutiny from next year


New legislation will see small businesses armed with greater legal protection from unfair contract terms.

The rules, which are expected to apply from next year, extend provisions currently available only to individual consumers to small businesses with 20 or fewer staff.

They will have greater power to test many take-it-or-leave-it contracts from larger businesses.

Where the contract is worth less than $100,000 (or $250,000 for a deal covering over 12 months of work), a small business will be able to ask for contract term revisions from the larger stakeholder.

If refused, there will be a legal avenue to appeal the term in court.

Nathan Cecil, from law firm Holding Redlich’s transport practice, says the changes acknowledge the relative lack of bargaining power that small businesses have in the modern marketplace.

Bill of lading contracts, company standard terms and conditions, marina and berthing agreements, ship repair agreements, and road transport terms frequently employed in the transport sector are all often found in "standard-form" contracts that will be subject to the new protections.

Cecil notes that the transport sector will be heavily impacted, both in terms of small transport operators dealing with large customers, and larger trucking businesses dealing with small and one-off cartage contracts.

"Many carriers will presently provide services to freight forwarders which are small businesses," he says.

"Similarly, many logistics and marine service providers will presently provide services to cargo and vessel owners which are small businesses."

Typical terms that may be considered "unfair" are those that permit one party to avoid or limit performance of the contract and those that attempt to divert legal liability or limit one party’s right to sue another.

Unreasonable penalties and hard-to-achieve performance measures may also be subject to the new legislation.

"If a term is found to be unfair, it will be struck out of the contract and will not be able to be relied upon," Cecil says.

He advises carriers with standard, company-wide contracts to review their arrangements well before the new laws come into force.  

"Any contractual terms which may potentially be considered unfair may need to be amended, or measures introduced to bring them to the attention of the other party, along with an explanation of their operation," he says.

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