Geoffrey Taperell and Dillon Fuzi discuss unfair terms with the extension of the law against unfair contract terms to standard form 'small business contracts'.
On 12 November 2016, the law against unfair contract terms in standard form ‘consumer contracts’ was extended to cover standard form ‘small business contracts’. Under the law, if a term of such a contract is unfair, it is void and unenforceable.
A ‘small business contract’ is a contract for the supply of goods or services, including financial services and interests in land, if:
A ‘standard form contract’ is a contract prepared by one party which the other party has little or no opportunity to negotiate, and includes contracts offered on a ‘take it or leave it’ basis.
There are a number of situations where the law does not apply, including with regards to terms that:
The law also does not apply to:
Only a court or tribunal has the power to make a binding declaration that a term is unfair and therefore void under the law. Some examples of terms that may be unfair include terms that enable one party (but not the other) to:
Whether the remainder of the contract will remain in effect will depend on whether it is capable of operating without the void term. If the other party to the contract has suffered any loss or damage as a result of enforcement or reliance on the void term, the party may seek compensation from the supplier.
Because of the potential adverse financial and reputational consequences of contract terms being declared to be unfair, all businesses should review and, where necessary, revise their standard form terms and conditions of supply.