Standard Form Contracts: An Explainer
Want to increase efficiency of your business? Learn all about standard form contracts and factors to consider when creating them here.
Running a business can be fast-paced and busy at times, so it is important that you save time when you can. Standard form contracts can speed up your sales with customers and can make you far more efficient. While they have many benefits, there are clauses and practices that you will not be able to include in them. Therefore it is important that you know the essential information about standard form contracts.
What are they?
Standardised agreements that businesses offer their customers are standard form contracts. They use the same clauses, terms and conditions in the contracts that they sign with their clients. They usually are unable to be negotiated or changed by the customer, and are offered on a ‘take it or leave it’ basis. Unless proven otherwise, consumer contracts are assumed to be a standard form contract.
What are the benefits of them?
The chief benefit is that they improve the efficiency in which companies can undertake customers with clients. This is particularly relevant if they have a high volume of sales that they undergo on a regular basis. If businesses had to individually negotiate contracts, businesses would spend more time creating the contract than actually providing the good or service.
They can also ensure that the business complies with relevant legislation in each agreement they undertake. By standardising the incorporation of these terms, businesses do not have to worry each time they sign a contract that they may fall amiss of the Australian consumer protections.
When are they not standard form contracts?
There are some types of contracts that are never viewed as standard form contracts regardless of their subject matter:
- Some types of shipping contracts
- Insurance contracts that fall under the Insurance Contracts Act 1984
- Contracts that are constitutions, including many superannuation funds, companies and managed investment schemes
What can’t be in a standard form contract?
Principally, terms that ‘unfair’ are not allowed to be included in standard form contracts. Terms are ‘unfair’ when they create an imbalance between the parties, are not reasonably necessary and would be detrimental if they were enforced. Any term that is ‘unfair’ will be void so it is best not to use them in standard form contracts.
It is best to make terms that may be ‘unfair’, transparent or known to the customer. Transparency is vital in standard forms contracts, as consumers have little power to alter the terms of the agreement. Terms are less likely to be viewed as ‘unfair’ in standard form contracts if they are told to a customer. The best method is to consult a lawyer when creating your standard forms contracts. This can help ensure that none of your terms are ‘unfair’.
It is important to note that terms that are required by law will not be seen as ‘unfair’. So even if you think they may be ‘unfair’; do not worry as you are doing your legal duty to include them.
Furthermore, it is crucial that none of your conduct in the contract signing process is unconscionable. This means that you cannot do any actions that would be against good conscience or in ‘bad faith’. This includes misrepresenting the nature of the standard form contract.
Therefore it is important to know about standard form contracts and pitfalls you should watch out for when using them. As long as you are acting in good faith and disclose important terms, you should be able to utilise standard form contracts without worry. You should also have a lawyer review your standard form contracts to give you piece of mind.
Need help making a standard form contract? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.
Lachlan is an intern at Lawpath as part of the content team. He is currently studying a Juris Doctor at the University of Sydney. Lachlan has a keen interest in corporate law and commercial litigation.