How Parliament has revolutionised the rules of contracting

ROBERT GOTTLIEBSEN
2 DEC, 2015
POLITICS NATIONAL AFFAIRS INDUSTRIES

The date of November 12, 2015, should be marked in the diaries of all major company chief executives and the heads of large government organisations. On that day, the unfair contracts legislation was proclaimed, ushering in a completely new era for contracting with small enterprises in Australia.
The act gives large organisations one year to get their house in order but, as of now, many hundreds of thousands of contracts will be made void in November 2016 unless they are radically changed.
This unprecedented revolution ranks in importance with major shifts trade practices, competition and industrial relations law because it goes to the heart of the way companies conduct their business. I believe that when we look back we will regard the unfair contracts act as even more important than any of the above three areas of legislation.
Despite furious lobbying from business lobbies, led by 7-Eleven and the banks, the unfair contracts legislation was backed by all the major parties and the cross benches because they all realised that Australia needs fundamental change in this area if we are going to prosper. They saw how independent contracting is driving employment in the UK. Australia will now follow.
Some of the badly managed industrial sectors will try and get exemptions via regulation, but everyone in the Senate is on alert should Assistant Treasurer Kelly O’Dwyer be nobbled by high pressure lobbying.
Exemptions via regulation will be thrown out by the Senate unless they have a really good case (parties involved with retail leases have been lobbying, probably successfully, that they already operate in accordance with extensive regulation).
What makes the unfair contracts legislation so important is that it ushers in fundamental change in the way the majority of large Australian companies and organisations conduct their business. The revolution was achieved without any involvement by the print press outside The Australian.
Those few businesses that don’t follow businessspectator.com.au or The Australian currently have no idea what is ahead of them. But it won’t take them long to find out. The ACCC is assembling a task force to contact major corporations and government organisations to review their contracts. They will emphasise that where contracts have actually been negotiated with small enterprises or sole traders the act does not apply.
But in the vast majority of cases, large corporations and government departments are lazy and simply issue standard form contracts to businesses employing less than 20 people on a ‘take it or leave it’ basis.
Almost all these contracts will be in breach of the act, assuming the standard-form contracts are under $300,000 for those spanning less than 12 months and $1 million for those contracts extending beyond 12 months. Most of these contracts have been prepared by lawyers and middle managers with no interest in fairness.
So, under the act what does ‘fairness’ mean exactly?
Small business contracts are set to be declared “unfair” if they give one party, but not the other, the ability to:
a) Avoid or limit the performance of the contract.
b) Terminate the contract.
c) Apply penalties against the other party for a breach or termination of the contract.
d) Vary the terms of the contract.
e) Renew or not renew the contract.
f) Vary the price payable under the contract without the right of the other party to terminate the contract.
g) Unilaterally vary the characteristics of the goods or services to be supplied under the contract.
h) Unilaterally determine whether the contract has been breached or to interpret its meaning.
i) Limit one party’s vicarious liability for its agents.
j) Permit one party to assign the contract to the other party’s detriment without their consent.
k) Limit one party’s right to sue the other party.
l) Limit the evidence one party can adduce in legal proceedings in respect to the contract.
m) Impose the evidential burden on one party in legal proceedings in respect to the contract.
I am indebted to Ken Phillips, executive director of Independent Contractors Australia, for this list of “dont’s” all of which are very common in standard-form contracts, including IT contracting. His comment in Business Spectator (A welcome disruption to the economy, December 1) is important reading.
Phillips played an enormous role in convincing the politicians what was required in the national interest. The Australians’ Grace Collier and myself have been the only other journalists covering this momentous event.
I believe when companies and government departments start to look at the multitude of unfair contracts they will discover that they actually improve their operations with fair contracts. Just as importantly it will be an important driver of Australian productivity and entrepreneurship.
When you play an important role in achieving a nation improving event that makes large organisations see small contractors as part of the team and not someone to be bullied, it makes journalism worthwhile.
Footnote: We should not forget the important role of former small business minister Bruce Billson. Almost single handedly he made fair contracts part of Liberal policy. Unfortunately, under extreme lobbying pressure, the Abbott cabinet made the proposed act useless (Small business will be furious with Billson’s broken promises, June 3) but that was rectified by the Senate and later the Turnbull government.