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Law commission unfair contracts small business extract

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  • Law commission unfair contracts small business extract

    PROTECTING SMALL BUSINESSES
    11.
    The report also recommends improved protection for small businesses. At
    present, where a business contracts on the other party’s standard written terms
    of business, it may challenge unfair exclusion clauses. This means that the court
    may review the fairness of a term that excludes or limits liability for negligence or
    breach of contract, or purports to allow the other party to render a contractual
    performance substantially different from that which was reasonably expected.
    12.
    We were told that small businesses frequently find themselves signing contracts
    that contain other unfair terms, which the law does not allow to be challenged.
    This is especially true where a small farmer, manufacturer or builder supplies a
    much larger business. The small business may be required to indemnify the
    larger business for losses that are not their fault, or forfeit deposits, or accept
    variations of price after the contract has been agreed. They may find that the
    larger business has reserved the right to terminate a contract at will, or for only a
    minor default, while the small business is bound more rigorously by the contract.
    13.
    We do not wish to interfere with business contracts that are genuinely negotiated
    between the parties. However, there is a problem when one party imposes its
    standard terms on a vulnerable small business. The small business may not
    understand the term or its consequences; and even if it does understand the term
    it will often lack the bargaining strength to change it.
    14.
    The draft Bill includes special protection for the smallest and most vulnerable
    businesses, commonly referred to as “micro businesses”. We define these as
    businesses with nine or fewer staff.
    15.
    Under our proposals, these very small businesses will be able to challenge any
    standard term of the contract that has not been altered through negotiation, and
    is not the main subject matter of the contract or the price.
    16.
    However, we do not wish to interfere where contracts are already sufficiently
    regulated, or where the business is sufficiently sophisticated to look after its
    interests. We therefore set out a number of exceptions to the new small business
    protections. We exclude contracts for financial services, contracts over £500,000
    and situations where the apparently small business is associated with other
    businesses, so that overall the group has more than nine employees. We also
    recommend that the exemptions currently in the 1977 Act should apply to the
    new controls on small business contracts. These exclude, for example, contracts
    for land, intellectual property, or security interests or contracts to form or dissolve
    contracts. Here people will usually seek legal advice.
    17.
    In an ideal world, a well-resourced organisation would use preventive powers to
    protect small businesses generally, by challenging those that imposed unfair
    standard terms on them. However, we have not been able to find an organisation
    with the resources to take on this task. The draft Bill does not presently include
    preventive powers to be used on behalf of small businesses. However, if
    resources could be found, this would provide useful protection. Many small
    businesses told us about unfair terms that could be challenged under the present
    law, but which are still used because the small business lacks the ability to bring
    court action
    #staysafestayhome

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  • #2
    Re: Law commission unfair contracts small business extract

    The BILL - http://www.lawcom.gov.uk/docs/lc292bill.pdf
    #staysafestayhome

    Any support I provide is offered without liability, if you are unsure please seek professional legal guidance.

    Received a Court Claim? Read >>>>> First Steps

    Comment


    • #3
      Re: Law commission unfair contracts small business extract

      Well at least australia have done something http://www.mondaq.com/article.asp?articleid=452752
      #staysafestayhome

      Any support I provide is offered without liability, if you are unsure please seek professional legal guidance.

      Received a Court Claim? Read >>>>> First Steps

      Comment

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