Unfair contract terms and small businesses: Examples and practical considerations
This article includes some, but not all, of the examples of clauses in contracts which could include unfair terms.
Australia
Corporate/Commercial Law
What are some examples of unfair contract terms?
There are a number of examples regarding the types of clauses
which could be found to be unfair terms. The table below shows some
but not all of the examples which may be relevant.
In some situations, the very type of clause highlighted below
can actually be fair, reasonable and effective and it is important
to think about each contract on a case by case basis. Not every
type of clause below is unfair in every set of circumstances.
TYPE OF CLAUSE: LIMITED LIABILITY
|
Examples |
Practical Considerations |
- Clauses that limit liability irrespective of fault;
- Clauses that do not provide for proportionate reduction in
liability for contribution to the loss or damage by the other
party.
|
- Parties should be liable for the loss they cause or contribute
to.
- Consider whether the other party should be liable:
-
- For your negligence;
- To the extent you cause or contribute to the loss or
damage
- Whether it is appropriate to attempt to exclude consumer rights
under the Australian Consumer Law.
|
TYPE OF CLAUSE: BROAD INDEMNITY
|
Examples |
Practical Considerations |
- Clauses that require one party to indemnify the other party
including for loss or damage that was not caused by the party
providing the indemnity.
|
- The indemnifying party should be "on the hook" for
the loss or damage that they cause and to the extent that they
cause it.
- Consider the indemnifying party should be responsible:
-
- For their negligence;
- To the extent only that they cause or contribute to the loss or
damage.
|
TYPE OF CLAUSE: ENTIRE AGREEMENT
|
Examples |
Practical Considerations |
- Clauses that provide that the agreement supersedes all prior
agreements and contains all things necessary and relevant to the
subject matter of the contract.
|
- Is it clear that some pre-contractual representations can still
be relied upon?
- Are only previous written agreements superseded?
|
TYPE OF CLAUSE: UNILATERAL VARIATION
|
Examples |
Practical Considerations |
- Clauses that allow only one party to vary the contract, but not
the other.
|
- Is the other party given prior notice of the change before it
takes effect?
- Does the other party have the ability to terminate the contract
if they do not agree to the change?
- If the other party can terminate, are they refunded their
reasonable fees and charges paid in advance?
- Can either party vary the contract for specific clear
reasons?
- Can the contract only be varied by written (clear) agreement
between the parties?
|
TYPE OF CLAUSE: UNILATERAL RENEWAL OR AUTOMATIC RENEWAL
|
|
Examples |
Practical Considerations |
- Clauses that allow one party to renew (or not renew) but do not
provide the same right for the other party.
|
- Is the unilateral renewal or the automatic renewal clause
adequately disclosed to the other party?
- Is there provision for notice regarding the renewal?
- Is there a reasonable period to take action or provide notice
to stop the renewal?
- Is there any termination or other fee payable if the renewed
contract is terminated?
- Is there a potential option to terminate at the end of the
initial term (and prevent the renewal or roll-over)?
- Can the automatic renewal provisions be "turned off"
in the contract?
- Is the other party provided with notice where the agreement has
a roll over or automatic renewal, but that roll over or automatic
renewal is not applied (that is, the agreement is terminated)?
|
TYPE OF CLAUSE: UNILATERAL VARIATION OF PRICE
|
Examples |
Practical Considerations |
- Clauses that allow one party to vary the price but do not allow
the other party a corresponding right to terminate
|
- Is the change in price simply a result of passing on a cost
which is outside a party's control (for example, a third party
increase or a cost increase due to change in law)?
- Is notice of the price change provided to the other party, in
advance?
- Can the other party terminate the contract if it does not agree
to the price variation?
- Is any penalty imposed on the other party if it terminates the
contract if it does not agree to the price variation?
|
This article has been published as an addition to part one:
Spotlight on unfair contracts and small businesses.
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.
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