In 1998 laws were passed to protect small businesses from becoming victims of harsh or unfair behaviour by larger parties with which they have commercial relationships. These relationships could involve a supplier or a business customer. Or it could involve a franchise or retail tenancy agreement. These laws apply to business conducted from 1 July 1998.
Section 51AC of the Commonwealth Competition and Consumer Act 2010 (formerly the Trade Practices Act 1974) makes it unlawful for persons or companies to engage in what is called "unconscionable conduct”. While the unconscionable conduct provisions are an effective way to provide redress for unacceptably harsh commercial practices, prevention is always better than cure. It is far easier to stop a problem from getting out of hand in the first place than to try to repair the damage afterwards.
Small businesses can reduce the possibility of being a target of unconscionable conduct by:
- getting everything possible in writing
- reading contracts carefully before signing
- checking on any points not understood
- seeking professional advice when doubts remain
- negotiating for a better deal.
The unconscionable conduct provisions are not intended to solve all small business problems. They do not apply where one party has simply made a poor deal.
The greatest care should be exercised when making important financial or business decisions.