Unfair contract terms cost small firms

52% of small firms have felt the negative consequences of unfair contract terms with their suppliers in the last 3 years, the Federation of Small Businesses (FSB) has found.

In a survey of 971 of its members, the FSB found that 40% of small businesses felt powerless to do anything about unfair contract terms because the supplier was too important to them.

The most common unfair terms cited were:

  • Auto-rollover clauses not being made clear up-front (24%)
  • Lengthy notice periods (22%)
  • High early termination charges (20%)
  • Concealed details in the small print (20%).

75% of those businesses affected by negative contract terms had encountered problems twice in the last 3 years. The costs of trying to solve problems generated by unfair terms can be significant, with 37% paying £1,000 or more and 11% paying over £5,000.

Mike Cherry, national chairman of the FSB, said:

“Small businesses don’t have the time, expertise or purchasing power to scour the market to find and negotiate the best deals. Small businesses owners behave in a similar ways [sic] to consumers, but they don’t have the same guarantees of quality or legal redress in an unfair situation.

“If small firms were better protected when entering a contract with a supplier, they would have more confidence and trust in the market.”

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