1. Melbourne: T: +61 3 9603 3555 F: +61 3 9670 9632
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Unfair Contract Terms and Franchising
October 2015
1 Background
The unfair contract term protections
in the Australian Consumer Law
(ACL) will be extended to standard
form “small business contracts”.
4 Unfair clauses in
Franchise Agreements
The following clauses in franchise
agreements may be considered unfair:
• terminating without cause;
• unilateral variations;
• fines for breaches;
• broad indemnities; or
• limits where action can be taken
against franchisors.
3 What is
considered an unfair
term?
All of the following must be satisfied:
• causes a significant imbalance in
the parties’ rights and obligations
under the contract;
• is not reasonably necessary to
protect the legitimate interests of
the party who would be advantaged
by the terms; and
• would cause detriment (whether
financial or otherwise) to the small
business if it were to be relied on.
2 Under what
circumstances do the
provisions arise?
To standard small business contracts that
involve one party that employs less than 20
employees, and either:
• if contract is less than 12 months, the
upfront price payable (which includes
any interest payable) is less than
$300,000; or
• if the contract is longer than 12 months,
the upfront price payable is less than $1
million.

2. Melbourne: T: +61 3 9603 3555 F: +61 3 9670 9632
Sydney: T: +61 2 8267 3800 F: +61 2 8267 3888
Newcastle: T: +61 2 8267 3888 F: +61 2 8267 3888
E: information@hallandwilcox.com.au
Follow us on:
Bruce McFarlane
Partner
T: +61 3 9603 3567
M: +61 402 205 878
bruce.mcfarlane@hallandwilcox.com.au
Contact
7 When are
the amendments
commencing?
The Amendments are due to commence
12 months after the Bill receives Royal
Assent. It was passed on 20 October
2015. Royal Assent is expected within the
next two weeks.
Likely to become operative before
the end of next year.
6 Factors to consider
with “standard form”
contracts
There is a presumption that a contract is
“standard form” if:
• there is uneven bargaining power;
• the contract is prepared by the stronger
party;
• the weaker party can only accept or reject;
• there is little or no opportunity to negotiate
the terms of the contract; or
• the terms of the specific transaction are
not taken into account.
5 What will be
affected?
• Franchise and licence agreements,
plus other common agreements
in the franchising context such as
supply and distribution agreements,
terms and conditions and rental /
leasing contracts.
• They only apply to new contracts
or those that are pre-existing and
renewed or varied.
• The minister can allow exemptions
for certain sectors.