Australia: ACCC wins first B2B unfair contract terms case

Last Updated: 28 October 2017
Article by Michael Corrigan and Matthew Evans

Most Read Contributor in Australia, October 2017

Putting one's cards on the table is a good way to reduce risks of terms being considered later as unfair.

Applying for the first time new laws that protect small businesses from unfair contract terms, the Federal Court has declared, by consent, that eight terms in the standard form contract used by JJ Richards & Sons Pty Ltd to engage small businesses are unfair and therefore void.

The outcome serves as a warning to all businesses to review their standard form contracts with small businesses and to consider revising any clauses that may otherwise risk being rendered void and unenforceable if challenged as "unfair" under the unfair contract laws.

The unfair contracts regime

Since 2010, the Australian Consumer Law has provided consumers with protection against unfair contract terms imposed on them via standard form contracts. These provisions were extended in late 2016 to cover terms of standard form contracts to which small businesses are parties.

Standard form contracts employ standardised, non-negotiated terms. They commonly arise where:

  • one party has all or most of the bargaining power relating to the transaction;
  • the contract was prepared by one party before any discussion relating to the transaction occurred between the parties; and
  • one party, in effect, was required either to accept or reject the terms of the contract in the form in which they were presented.

Contracts for the supply of goods and / or services will amount to a "small business contract" if:

  • the counterparty is a business employing fewer than 20 people; and
  • the upfront price payable under the contract is no more than $300,000 or $1 million if the contract is for more than 12 months.

A term of a standard form contract will be "unfair" if it is one-sided and excessive, that is, it creates a "significant imbalance" between the parties 1, is not reasonably necessary to protect the benefiting party's legitimate interests 2 and would cause detriment to the other party.

In determining whether terms are "unfair", a court will also read the term(s) in the context of the entire contract and will take into consideration the transparency of the contract, including how upfront, easy to read and clearly presented the contract is to the affected party.

The case alleged against JJ Richards

JJ Richards is one of the largest privately-owned waste management companies in Australia and provides recycling, sanitary and green waste collection services.

The ACCC alleged that JJ Richard's standard form small business contracts contained eight unfair contract terms:

  • binding customers to commit to subsequent contracts unless they cancel the initial contract within 30 days before the end of the term;
  • allowing JJ Richards to unilaterally increase its prices (price variation clause);
  • removing any liability for JJ Richards where its performance is "prevented or hindered" even where the customer is not responsible (performance clause);
  • allowing JJ Richards to charge customers for services not rendered for reasons that are beyond the customer's control (or potentially for reasons within JJ Richards control - for example, equipment failure);
  • granting JJ Richards exclusive rights to remove waste from a customer's premises (exclusivity clause);
  • allowing JJ Richards to suspend its service but continue to charge the customer if payment is not made after seven days;
  • creating an unlimited indemnity in favour of JJ Richards (indemnity clause); and
  • preventing customers from terminating their contracts if they have payments outstanding and permitting JJ Richards to continue charging customers equipment rental after the termination.

Decision of the Federal Court

The parties agreed that the impugned terms, which the Federal Court noted "tend[ed] to exacerbate each other", created a significant imbalance between JJ Richards and its customers. The Federal Court was also satisfied that the terms were not reasonably necessary to protect JJ Richards' legitimate interests.

By way of example, the:

  • price variation clause was said to cause a significant imbalance because the clause imposed no corresponding benefit upon customers to terminate the contract or change the scope of services in the event that JJ Richards decided to unilaterally increase its prices. Also, because the price variation clause allowed JJ Richards to increase its prices for any reason, eg. simply to increase revenue, the clause was not necessary to protect JJ Richards' legitimate interests;
  • performance clause was said to cause a significant imbalance because it removed any liability for JJ Richards where performance of its services had been prevented or hindered, even where the customer was not responsible for the prevention or hindrance or where JJ Richards was better placed to mitigate the risk of the prevention or hindrance. Also, because the performance clause required the customers to assume the risk of non-performance under circumstances they did not control, the clause was not necessary to protect JJ Richards' legitimate interests;
  • exclusivity clause was said to create a significant imbalance because the clause limited the customers' general right to contract with whomever they want. Also, because JJ Richards did not require exclusivity in relation to waste management in order to conduct its business, the clause was not necessary to protect JJ Richards' legitimate interests; and
  • indemnity clause was said to create a significant imbalance because it indemnified JJ Richards for losses which could have been avoided by JJ Richards, without providing a corresponding benefit for the customer. Also, because the indemnity clause indemnified JJ Richards for losses not caused by its customers, the clause went beyond what was reasonable necessary to protect JJ Richards' legitimate interests.

What does this mean for businesses?

Although there are no fines or penalties for having a term declared unfair, all businesses will need to consider the enforceability of their B2B standard term contracts to minimise the risks that various terms might be declared void.

In considering whether B2B standard terms are likely to be declared void businesses should be particularly aware of clauses that:

  • require one party to bear the risk of a high-cost, low-probability event;
  • create an automatic rollover extension of the contract;
  • allow one party to vary the contract unilaterally;
  • affect or remove the ability of the other party to vary the contract terms, limit their obligations, terminate or renew the contract;
  • levy excessive fees;
  • impose excessive interest rates on outstanding moneys; and / or
  • affect or limit a party's ability of redress or remedies for breach by the other party.

What can businesses do when using standard term contracts?

It is recognised that standard form contracts are commonly used in business and are an efficient and cost-effective option. In the consumer area the courts have emphasised that terms may not be unfair if they are clearly drawn to the other party's attention prior to the agreement (eg. Jetstar Airways Pty Ltd v Free [2008] VSC 539). Putting one's cards on the table is a good way to reduce risks of terms being considered later as unfair.



1 The Federal Court in JJ Richards & Sons Pty emphasised that the "significant imbalance" requirement is met if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significant in its favour.

2 A term of a contract is presumed not to be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, unless that party proves otherwise: section 24(4) of the ACL.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.