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Determining if the Contract is Unfair

The first B2B standard terms contract test case goes to Court

Since 2010 consumers have been able to challenge certain unfair contracts in the Courts.

In November 2016 that right was effectively extended to small businesses where that business had less than 20 employees and the upfront payment was $300000 or less or $1,000,000 if payable over 12 months.

Under the new laws introduced last year a term in a standard form contract will be unfair if it is excessive , favours one party unreasonably , not necessary to protect the legitimate interests of the party seeking to impose it and would cause a detriment to the other party . In such cases the court could avoid the unfair term so that it became unenforceable

For some time now the ACCC has been proactive in this space . Earlier this year it organised meetings with some large business enterprises such as Uber Fairfax Lendlease and Sensis which resulted in these businesses changing terms in their standard forms which may have been unfair.

In addition the ACCC had announced that it was going to zero in on unfair contracts as part of its compliance strategy this year

Early in September the ACCC commenced action against the waste management entity JJ Richard and Sons Pty Ltd ( the company ) in the Federal Court alleging that at least 8 terms in their contracts were unfair and should be declared void

Those terms include for example :

Allowing the company to unilaterally vary the prices it charges

Continuing to charge customers for services after the contract has been suspended or terminated

Giving the company an overarching and unlimited indemnity in any circumstance

These are just 3 of a number of terms which the ACCC has promised to target with others including automatic contract renewal and liquidated damages on the radar

Although the federal court is yet to determine this test case it would be wise for all businesses but particularly those larger enterprises to consider reviewing their contract terms to ensure they are fair or risk the possibility of an action by the ACCC or other party in the courts

If you have not had your standard terms contract reviewed then this is the time to contact David or Reuben at PBL to do so

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