Evaluating the Small Business and Unfair Contract Terms - Coursework Example

Evaluating the ”Small Business and Unfair Contract Terms.” by Student Name Course + Code Professor’s Name University Name City Date Evaluating the ”Small Business and Unfair Contract Terms.” The Australian government has made significant progress in carrying out policy reforms in several sectors to promote trade. Recently, the government enacted a business Bill that is intended to improve the contract terms that bind parties doing business together under the Australia law. In particular, the Treasury Legislation Amendment Bill 2015 also called the Small Business and Unfair Contract Terms sought to improve the provisions of the then existing unfair contract terms. The ”Small Business and Unfair Contract Terms” is a law that was implemented by the Australian government to offer a ’fair go’ for petite enterprises. The law seeks to promote small size businesses by expanding the protections of the unfair contract terms to cover the small size businesses as it currently protects the customers. The bill was implemented to help amend the Australian Consumer Law as outlined in Schedule 2 of the ”Competition and Consumer Act 2010” as well as the ”Australian Securities and Investments Commission Act 2001”, to cover both consumers and small businesses. This essay thus seeks to illustrate how the new law is likely to change the image of the business and overall engagement between small firms and consumers in Australia. In this essay, I agree with the new law because of the various benefits it will offer businesses and consumers by changing the old Australian Consumer Law. After its establishment, the unfair contract terms was set to apply to small businesses starting November 12, 2016. Beginning November 21, 2016, the law would extend the current unfair contract terms protections for clients to cover normal form of undersized business contracts (Boustani, 2016). In lieu with the Australian Consumer Law, unfair contract terms law is defined to include the following elements: A term is considered unfair if it is deemed likely to lead to a significant disparity in the rights and obligations as set out in the contract; A term is unfair if it is not logically compulsory to safeguard the genuine interests of the party who would be favored by the term; and A term that would cause harm to the party if used or relied upon. Under the new law, an unfair contract term refers to the terms that recognize the importance of both parties in the contract (Boustani, 2016). Unlike the old unfair contract terms that also gave emphasis to the rights and welfare of consumers, the new law seeks to balance between clients and small businesses. The new law recognizes that both consumers and petite enterprises have restricted market influence and a reduced capacity to change ’take it or leave it’ contracts. Under the recently implemented law, the unfair contract terms regulation is justified to extend protections for small enterprises and started to apply ordinary types of small business contracts including new and renewed contracts, on November 12, 2016 (Mena Report 2016). The new law declared the unfair term in a contract involving small businesses as void by the court on condition that the small business had less than 20 employees at the time the parties agreed to the ordinary type contract. Besides, the only recognizes a contract that does not involve more than $300,000 and includes a means of exempting some particular contracts from the protections. In such a case, the exemption mechanism requires that exempted contracts are likely to receive equal and enforceable protections as established under the new law. Such waiver is considered necessary as it helps to evade regulatory duplication. Seemingly, only a court or tribunal can discern whether contract terms are unfair or otherwise. The court is expected to consider the degree to which the terms under question are transparent and the entire contract binding two parties when determining if the terms are unfair. In determining whether a contract term is open, the court considers various aspects including establishing if the term is legible, communicated in logically plain language, clearly presented, and easily accessible to all parties affected by the term. In the event when a court finds court determines that a certain contract term is unfair, it make a broad range of demands that have severe legal impacts especially on the parties in a contract (Australian Securities & Investments Commission (ASIC), 2016). In the event where a court establishes that a particular contract term is ’unfair’ the decision made by the court or tribunal has several legal effects including the following: The court can declare the particular term as void, which implies that the term is no longer binding on the parties involved. However, the remaining sections of that contract will still bind the parties but only to the extent the contract can exist without the term considered unfair. In such as case, a business that attempts to implement a term declared unfair by the court against a customer is automatically in violation of the ”Fair Trading Act.” The court can vary the contract. If the term if found to be unfair, the court may refuse to enact some or entire contract terms or agreement. The court can also direct a party to repay money or give back the property to the petite enterprise affected by the application or reliance on the term. The court can also direct one party to offer services to the miniature enterprises affected by use or reliance on the unfair term. If the court determines that the term in an ordinary type of contract is unfair, it declares the term void (Lattin, 2016). In such a case, the legal effect is that the court can treat the unfair terms as if they never existed, but the contract can continue to keep parties in the agreement if it can operate without the unfair term(s). Besides, the court may also consider a number of remedies including issuing an injunction, giving an order for redress to the affected party, and any other remedies that the court may consider appropriate. The doctrine of the freedom of contract holds that persons have the right to bind themselves legal. According to the freedom of contract concept, people choose to enter into contracts based on reciprocated accord and free will (Bondarenko, 2016). Thus, the concept of freedom of contract does not advocate for the involvement of the government in the process of enforcing contracts. This is because the concept holds that contracts are not required to be hindered by external forces including interference of the government. Following this principle, individuals can fashion their relationships based on private agreements because of the principle if founded on two concepts. One of the concepts is that contracts established under this doctrine are formed based on mutual agreement. The second concept of the freedom of contract is that people create contracts as a result of free will and should not be affected by an external control such as the legislature or government. Considering the above information on the doctrine of freedom of contract, it is evident that it conflicts with the unfair contract terms. First, freedom of contract discourages the influence of external factors such as government involvement while the unfair contract terms allow the legislature and government to take part in enacting the contract. For instance, the unfair contract terms law highlights the mechanism that seeks to permit the government to excuse laws that it considers are equal to the unfair contract terms bill. Second, the doctrine of freedom of contract entirely depends on consent and has no financial limits whereas unfair contract terms restrain the contract amount to not more than $100,000 or $250,000 for small business contracts. The ’transaction value’ threshold applies to one concept but not the other, as freedom of contract supports free choice. Thus parties can freely choose the amount they wish to pull together. Third, freedom of contract does not state or limit the contract agreement to some number of people like how unfair contract terms restricts the number of employees to less than 20 for a party wishing to enter into an enforceable contract. Hence, enforcing these two laws can have significant consequence due to conflicting provisions. Legislation and common law concepts are used for the common function of maintaining social order. In summary, the relationship between legislation and common law is that legislation is documented on common law. Whereas common law originates from common individuals in the society, legislation occurs through the actions and decisions of leaders the people elect (Hobart Community Legal Service Inc. 2013). Precisely, legislation and common are both laws that apply to all the people in the society to establish and maintain social order. Common law occurs naturally and has developed for centuries. However, legislation is also a law formulated by elected officials in parliament. Despite both common law and legislation being regulations governing the society, one of them prevails over the other. The proactive outcome of the principle of parliamentary autonomy indicates that legislation always prevails over the common law. For instance, in the case of conflict between legislation and common law, the lawmakers would choose legislation over common law. Since people write legislation on common, they hold a presumption that rights provided by common law continue to exist except when the legislation abolishes them. Bibliography Bondarenko, NL. (2016). The Principle of Freedom of Contract in Civil Law of the Republic of Belarus. Vestnik Permskogo Universita. Juridicheskie nauki - Perm University Herald. Juridical Sciences. Issue 33. Pp. 281-285. (In Eng.). DOI: 10.17072 / 1995-4190-2016 33-281-285 Boustani, Hadi. (2016). ”Unfair Terms for Standard Form Contracts are now in Force.” Mondaq Business Briefing: Mondaq Ltd. Australian Securities & Investments Commission (ASIC). (2016). ”Unfair Contract Term Protections for Small Businesses.” Retrieved from http://asic.gov.au/about-asic/what-we do/laws-we-administer/unfair-contract-terms-law/unfair-contract-term-protections-for small-businesses/ Hobart Community Legal Service Inc. (2013). ”Elements of Criminal Justice System.” The Law: Legislation vs Common Law. Retrieved from http://www.hobartlegal.org.au/tasmanian law-handbook/courts-lawyers-and-law/law/legislation/legislation-vs-common-law Lattin, Avryl. (2016). ”Australia’s Unfair Contract Terms Regime Extended.” Mondaq Business Briefing. Mondaq Ltd. Mena Report. (2016). ”Australia: Small Business Unfair Contract Protections Enshrined in Law.” SyndiGate Media Inc. Read More