In the space of a fortnight, the Australian Competition and Consumer Commission (ACCC) has commenced two sets of proceedings in the Federal Court against large Australian businesses, claiming breaches of the unfair contract provisions applicable to standard form small business contracts contained in the Australian Consumer Law.
The provisions apply to contracts where one of the parties is a business that employs fewer than 20 people and the upfront price payable is less than $300,000, or where the contract duration exceeds one year and the upfront price payable does not exceed $1 million.
The ACCC filed proceedings against waste management services provider JJ Richards & Sons Pty Ltd on 6 September and office space and virtual office services provider Servcorp Ltd and two of its subsidiaries on 14 September.
The allegations against each business differ, but largely concern the same sorts of terms which permit only one party to:
- avoid or limit its obligations under the contract;
- terminate the contract;
- vary the contract, including in respect of the upfront price payable or the goods or services to be supplied under the contract;
- renew the contract; and
- determine whether the contract has been breached.
The ACCC’s actions highlight its commitment to enforcing the business-to-business unfair contract legislation enacted less than a year ago, but more broadly should encourage all businesses to review and update their standard form contracts to align with regulatory expectations.
Ensuring that your business’s terms and conditions are compliant is not just about avoiding reputational damage. We often see contract negotiations become unnecessarily protracted due to the base document containing terms which are not reasonably necessary to protect the legitimate interests of the party in whose general favour the document has been drafted. By adopting terms which are both sufficiently protective and compliant, negotiations between parties (and their advisers) should be minimised, reflecting a more cost-effective approach to contracting with your customers.
To speak with a member of our team about how we can help review and amend your standard form contracts, please contact: