A new law affecting small business contracts has just been passed by the Senate, which could affect broker agreements.
According to an update from Gadens law firm, the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 was passed by the Senate on the 12th of November. This new law amends both the Australian Securities and Investments Commission Act 2001
and the Competition and Consumer Act 2010
to provide protections for small business in the face of unfair contract terms.
The changes are designed to protect small businesses from terms which are unfair in the contracts they enter with other businesses and according to Elise Ivory, a partner at Gadens, are very similar to the protections that are already given to consumers.
“They are looking for things that really favour one party at the expense of the other when that is not a reasonably necessary term for their own protection. They are looking for things that are very, very one-sided with no reason for it,” Ivory told Australian Broker
When asked if the new laws could cover clawback provisions in lender/broker agreements – which many brokers do find unreasonable – Ivory said clawbacks could come under the rules regarding upfront price, although she isn’t sure those terms would be classed as unfair.
“I haven’t heard whether [clawbacks] would be unfair. There are some rules regarding upfront price and whether those terms would fall under those rules I am not sure,” she told Australian Broker
“One thing that you can’t contest is the upfront price for something. For example, if a consumer has agreed to pay a broker $100 for their services then they can’t say that the $100 is unfair. So I am not sure where whether the clawbacks would fall into the upfront price or not.”
When asked about trail ownership and portability provisions in aggregator/broker agreements, Ivory – who said she can only speak on behalf of the experience Gadens has had with these contracts – said the new laws are unlikely affect these terms, although they will give a broker additional legal recourse if they feel they have been treated unfairly.
“The first thing to note is [Gadens] finds most of the aggregator agreements from the reputable aggregators do have quite fair contracts,” she told Australian Broker
“The second thing is that if the broker does find themselves on the wrong end of a clause that is unnecessarily harsh, this law is really just another avenue that they can use to pursue it. Whereas, there probably were avenues they could use in the past anyway – such as unconscionable conduct and things like that.
“This law is going to make things easier but it isn’t necessarily creating something that is new if the clause was completely unconscionable anyway.
“[Trail portability] does come up a lot but we find that most of the clients we act for have fair contracts and in most cases they can often come to commercial solutions anyway.”