The Federal Court has declared eight contract terms unfair in the first test of the new unfair contracts legislation in ACCC v JJ Richards & Sons Pty Ltd [2017] FCA 1224.
The case is a warning to large businesses to review their standard form contracts and consider revising any clauses that may be rendered void and unenforceable if challenged as “unfair” under the unfair contract laws.
The Court declared that eight contract terms that the waste management company JJ Richards & Sons used in its standard form contracts with small businesses were unfair and void, by consent. The standard form contract was a two page terms and conditions service agreement.
The unfair terms identified
The action was the first brought by the ACCC, with the following unfair terms identified:
- An automatic renewal provision binding customers to commit to subsequent contracts unless they cancel the contract within 30 days before the end of the term.
- A price variation provision allowing JJ Richards to unilaterally increase its prices.
- A no liability provision removing any liability for JJ Richards where its performance is “prevented or hindered in any way” even where the customer was not responsible for the hindrance or JJ Richards was better placed to manage the risk.
- A provision allowing JJ Richards to charge customers for services not rendered for reasons beyond the customer’s control.
- An exclusivity provision granting JJ Richards exclusive rights to remove waste from a customer’s premises.
- A provision allowing JJ Richards to suspend its service but continue to charge the customer for costs associated with overdue payment if payment is not made after seven days.
- A provision creating an unlimited indemnity in favour of JJ Richards even where the loss was not incurred by the customer or where the loss could have been mitigated or avoided by JJ Richards.
- A provision preventing customers from terminating their contracts if they have payments outstanding, and permitting JJ Richards to continue charging customers equipment rental after the termination of the contract despite no services being provided.
The court also considered how the various unfair terms interacted together, with the effect of amplifying the adverse impact on customers.
Key lessons
This case is a timely warning to review contracts, including standard terms and conditions which may already be in use, to ensure they comply with the unfair contract laws.
For small businesses who believe that they have entered into a contract that contains unfair contract terms, steps may be available in relation to those unfair terms.
How Opportuna Legal can help
Opportuna Legal advises businesses on the review and drafting of standard form contracts to ensure compliance with the unfair contract terms regime. If you need guidance on whether your contracts comply, contact Opportuna Legal.
Anthony Jarvis is the Managing Partner of Opportuna Legal, a corporate and commercial law firm based in Perth, Australia. Anthony advises private companies, founders, and boards on M&A, capital markets, corporate governance, and commercial contracts. Anthony advises business owners and family groups on trust structuring, succession planning, and corporate governance.
Contact: reception@opportunalegal.com.au | (08) 6110 3748
This article is general information only and does not constitute legal advice. Readers should obtain professional advice specific to their circumstances before acting on any of the information contained in this article.