Precedent Set for New Unfair Contract Term Protection in favour of Small Businesses

2 min read

On 12 November 2016 new amendments to the Australian Consumer Law (ACL) in respect of unfair contract terms will come into force. These amendments significantly expanded the scope of protection against unfair contract terms under the ACL.

Beforehand, protection against unfair contract terms under the ACL was only afforded to consumer contracts, which were defined as contracts where an individual acquired goods or services predominantly for personal, domestic or household use or consumption.

The new amendments have now extended the protection to small business contracts. So, what does that mean for your business? And have these laws been tested?

Recently, in a landmark case testing the new laws in ACCC v JJ Richards & Sons Pty Ltd [2017] FCA 1224 the Court declared by consent that eight terms in JJ Richards’ standard form contracts with small businesses, which were entered into or renewed after 12 November 2016, were unfair and consequently void.  These terms had the effect of:

  • binding customers to subsequent contracts unless they cancel the contract within 30 days before the end of the term
  • allowing JJ Richards to unilaterally increase its prices
  • removing any liability for JJ Richards where its performance is “prevented or hindered in any way”
  • allowing JJ Richards to charge customers for services not rendered even when caused by reasons beyond the customer’s control
  • granting JJ Richards exclusive rights to remove waste from a customer’s premises
  • allowing JJ Richards to suspend its service but continue to charge the customer if payment is not made after seven days
  • creating an unlimited indemnity in favour of JJ Richards
  • preventing customers from terminating their contracts if they have payments outstanding and entitling JJ Richards to continue charging customers equipment rental after the termination of the contract.

In finding that each of the terms was unfair, his Honour also found that “the Impugned Terms tend to exacerbate each other, increasing the overall imbalance between the parties and the risk of detriment to JJR Customers.”

In resolving these proceedings, JJ Richards consented to orders restraining it from relying on the unfair terms in existing small business contracts and from using the terms in future contracts with small businesses.

So, what does all the above legal jargon really mean? If you’re dealing with small businesses which have 20 employees or less, and the values of those contracts are under $300,000.00 be wary of their newly founded additional rights against unfair terms.

Unfair terms, according to the newly set precedent means any clause that:

  • requires one party to bear all the risk of a high cost, low probability event;
  • creates an automatic rollover of the contract;
  • allows one party to unilaterally change and vary the contract;
  • affect or remove the ability of the other party to vary the terms, limit their obligations, terminate or renew the contract;
  • levy excessive fees;
  • impose excessive interest rates on outstanding monies; and
  • affect or limit a party’s avenues of redress.

If you feel as though your current Terms and Conditions sound like or may fulfil the above unfair terms please contact us immediately at Priority Business Lawyers for a thorough review of your trading documents in order to ensure compliance.

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Picture of Authored By<br>Reuben Hernandez

Authored By
Reuben Hernandez

Director Lawyer, PBL Law Group

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Anita Bradley has been an absolute dream to deal with. Anita's conveyancing skills and knowledge knows absolutely no boundaries along with her effective communication skills which has made selling and buying a completely stress free exchange for us. We recommend PBL Law to everyone looking for outstanding service. We will definitely be returning clients.
Kushlan Aluwihare
PBL Law Group were fantastic. Anita from PBL worked with us closely during our property search and made the exchange and settlement process smooth and stress free. Highly recommended.
Gail Whitford
PBL handled my late mothers estate, they were very obliging and patient with any and all questions that we had, thank you to David , Sharon and the other staff that we dealt with, everyone was so easy to talk to and friendly .David came to the home where my Mother was living and helped her to get her will in order, Sharon helped us through the process of executing her wishes when the time came even doing a house call which was so much easier, thank you all so much
S M
I have experienced an excellent service from PBL (especially from Anita) during the sale of my recent property on Central Coast, and during the purchase of our current property in Sydney. Throughout many challengers, especially with the sale, Anita presented her very professional and knowledgeable conveyancer, positively solving all obstacles. "Above and Beyond" Award going to Anita!!! :-)
Amanda Reitzin
The five-star reviews are well-deserved. I needed a motion and a bylaw drawn up for urgent repairs of my strata unit and the AGM was in two weeks' time. My solicitor was friendly, efficient, knew what documents to ask for, and had all the paperwork prepared well within the timeframe. She also took the time to run through all the legalese and the different possible scenarios with me to make sure I understood. I am so glad to have found this firm and I will not hesitate to use their services again in future if the need arises.
Ricky Cooper
Anita is amazing! So attentive, approachable and communicates everything every step of the way. I have now bought and sold property with Anita and I cannot recommend her highly enough.
Ron Thomsen
Our Commercial Property conveyancing was handled very professionally. Anita’s experience and responsiveness was an asset in this transaction.
Trace M
I am so grateful for Anita Bradley from PBL Law Group helped me with this property settlement, she has went above beyond to ensure I understand everything because of our deafness. I will recommended Anita or their team. Thank you so much for all the hard work you have done for us.
Tricia Wheatstone
For almost 18 months I have been a client of Alex Ilkin. Alex is very knowledgeable and professional and has consistently provided me with thorough, honest and well set out advice, including steering my case through appeal proceedings. He always worked for my best interests with integrity and compassion. I recommend Alex and his team at PBL.