The unfair contract term provisions might help you to get out of an unfair contract.
Unfair Contract Term Provisions
Over the next two episodes let’s look at the unfair contract term provisions. How to get out of a contract that is unfair?
Simone Daniells of Andreyev Lawyers will walk you through the history and set up of the unfair contract term provisions. What is an unfair contract term? What are the rules? And how do they work?
Please listen to the episode since Simone explains all this much better than we ever could. But here is a very short overview of some things we learned.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Unfair Contract Term Provisions
To determine whether the unfair contract term provisions apply to your situation, you need to ask three questions.
1 – Are you a small business?
2 – Is this a standard form contract?
3 – Does the contract pass the 3-limb test? So is there
a) an imbalance of power,
b) no legitimate interest to protect and
c) a contract term detriment to you?
If you can answer all three questions with Yes, then the unfair contract terms might help you.
Let’s go through each of the three questions in more detail.
Question # 1 – Are you a small business?
To be a small business you need to have less than 20 employees and an upfront price of less than $300,000 or if for more than 12 months, of $1m. These conditions will probably change in 2022 or 2023, but this is what they are at the moment.
Question # 2 – Is it a standard form contract?
The presumption is that the contract is a standard form contract unless one of the parties can prove otherwise. It isn’t, if you negotiated any of the terms.
The unfair contract terms provisions only apply to standard form contracts. So won’t apply if you negotiated any of the terms.
Question # 3 – Do you pass the 3-limb test?
This is by far the hardest of three, since so grey and unclear. You pass the 3-limb test if you answer Yes to all of the following:
I – Significant Imbalance?
Is there a significant imbalance between the parties? The question of course is what is ‘significant’?
II – Protect Legitimate Interest?
Is holding on to the terms NOT reasonably necessary to protect legitimate interest? More grey: What is ‘reasonably’ and what is ‘legitimate’?
III – Detriment?
Is holding on to the term detriment to one of the parties?
This one is easy since a term is clearly detrimental to you, otherwise, you wouldn’t go for the unfair contract term provisions. You still have to prove ‘detriment’ but in most cases easy to do.
If you can answer Yes to all three questions – small business, standard form contract and 3-limb test – then you are protected by the unfair contract term provisions.
This was a very short summary but please listen in since Simone covers a lot more in much greater detail in this episode.
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Last Updated on 19 July 2021