Australia: Terms Of Standard Form Contract Used To Engage With Small Businesses Declared Unfair And Void

Last Updated: 1 May 2018
Article by Rodney De Boos and Grace O'Connor

Australian Competition and Consumer Commission v JJ Richards & Sons Pty Ltd [2017] FCA 1224

The Australian Competition and Consumer Commission  has reached an agreement with national waste management company JJ Richards & Sons Pty Ltd in relation to unfair terms in a sub-set of approximately 26,000 standard form contracts entered into by JJ Richards for the provision of waste management services to small businesses.

In proceedings filed in the Australian Federal Court, the ACCC contended that the relevant contracts contained terms which were "unfair" within the meaning of s 24 of the Australian Consumer Law (ACL) and were therefore void and unenforceable.

The JJ Richards contracts

The relevant contracts were standard form contracts which contained terms that had the following effect:

  • automatic renewal (in most cases equal in length to the initial contract term) unless the customer cancelled the contract within 30 days before the end of the initial term;
  • increased prices for the waste management services on 30 days' notice;
  • a waiver of liability where performance of the waste management services was prevented or hindered in any way, even where the customer was not responsible for the prevention or hindrance;
  • charges for services where JJ Richards attended but was unable to provide the services (even where the inability to provide the service was beyond the customer's control);
  • granting JJ Richards the exclusive right to provide waste management services at the relevant premises, preventing the customer from engaging a second party to provide services of this nature;
  • suspension of the waste management services if payment on an invoice was not made within 7 days;
  • unlimited indemnification in favour of JJ Richards was created; and
  • the prevention of termination of contracts if charges were outstanding, and a right to continue charging for the rent of the waste management equipment which would not be collected until payment was made.

The ACCC contended that these terms were unfair.

Amendments to the Australian Consumer Law to extend unfair contract terms provisions to small business contracts

In November 2016 the ACL was amended to extend the operation of provisions relating to unfair contract terms to small business contracts. The amendments apply in relation to contracts entered into or renewed on or after 12 November 2016. The amendments provide that a term of a small business contract is void if the term is unfair and the contract is a standard form contract (where all customers are offered the same or similar contracts).

Under the ACL, a contract is a small business contract if:

  • the contract is for the supply of goods or services; and
  • at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 people; and
  • either the upfront price payable under the contract is less than $300,000, or the contract has a duration of more than 12 months and the upfront price payable under the contract is less than $1,000,000.

The ACL also sets out when a contract is unfair. A term of a small business contract is unfair if:

  • it would cause a significant imbalance in the parties' rights and obligations arising under the contract; and
  • it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
  • it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

Section 25 of the ACL gives examples of the types of provisions which may be unfair.

The unfair contract terms

JJ Richards agreed that each of the eight identified terms were unfair under the ACL and were therefore void and unenforceable.

Justice Moshinsky also commented that the relevant terms were not transparent as the terms were:

  • not drafted in plain English, but rather were overly "legal" in nature;
  • not presented in a manner which was clear or readily accessible to a small business customer;
  • presented in a font size which was difficult to read; and
  • could be described as "densely packed".

In order to resolve the proceedings, JJ Richards consented to orders being made by the Court which restrained it from relying on the relevant terms in existing small business contracts, and preventing it from using the terms in small business contracts moving forward. JJ Richards was also required to provide a copy of the orders to all of its small business customers who were party to an affected contract.

Key lessons

Businesses regularly engaged to provide goods and services to small businesses should be careful to ensure that the standard form contracts they provide to their customers do not contain clauses which, for example:

  • automatically bind customers to a renewal of the contract;
  • enable one party (in most circumstances, the provider of the goods or services) to alter the contract unilaterally;
  • limit the ability of customers to vary the contract, including to terminate the contract;
  • limit the ability of the customer to seek redress for the failure of the goods or services provider to perform its obligations under the contract; or
  • create an unlimited indemnity in favour of the goods or services provider, even where loss incurred is not the customer's fault.

While the types of clauses which might be deemed to be unfair have not been exhaustively defined, in general, businesses should review and revise any terms of their standard form contracts which are of the same character as the examples set out in section 25 of the ACL.

Further, businesses should review the format and language of their standard form contracts to ensure that the terms and conditions are presented clearly and legibly, and are expressed in reasonably plain language. 

Businesses which fail to remove unfair terms from the contracts used to engage with small businesses risk being unable to rely on those terms if challenged under the unfair contract provisions of the ACL.

13 November, 2017

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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

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

Authors
Similar Articles
Relevancy Powered by MondaqAI
ClarkeKann Lawyers
 
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”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
ClarkeKann Lawyers
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions