Health News Alert: Medical Practices and Unfair Contracts - a timely reminder
On 12 November 2016 the law changed to protect small businesses from unfair terms in standard form contracts. Small businesses include medical practices with less than 20 employees that enter into contracts with an upfront price of less than $300,000 per annum or $1,000,000 over a longer period.
There is no precise definition of a standard form contract but there is an assumption that an agreement is a standard form contract unless the business that prepared the contract is able to prove that it is not.
If you run a small business and a term in your contract is found to be ‘unfair’ by a court or tribunal then that term will be void. This means the term will not apply and is not binding. It does not mean that the whole contract will be void unless, as a result of the unfair term being void, the contract is incapable of operating without that particular term.
A court or tribunal must determine if a term is unfair, but it is the Australian Competition and Consumer Commission (ACCC) that will enforce the changes. The ACCC indicated in a report released recently (‘Unfair terms in small business contracts: a review of selected industries) that in considering whether a term is unfair it will look at whether it ‘creates an imbalance of obligations between the parties, is necessary to protect a legitimate business need, and, if not reasonably necessary, whether it could cause detriment to the small business if relied upon’. The ACCC sets out in the report a number of general contractual terms it considers are potentially unfair.
For those medical practices that provide standard form contracts, take note that the ACCC has stated that the small business unfair contract terms law will be a priority for the ACCC going forward. For small medical practices entering into contracts this is also a timely reminder to review your agreements and obtain legal advice on new contracts to be entered into after 12 November 2016.
Karen Keogh, Partner