Are your business-to-business contracts fair?

Proceedings have been initiated in the Federal Court by the Australian Competition and Consumer Commission (ACCC) against JJ Richards & Sons Pty Ltd (JJ Richards) based upon the allegation that their standard form small business contracts are unfair under the Australian Consumer Law (ACL).

This is the first time the new laws have been tested since the unfair contract term provisions in the ACL were extended to cover standard form contracts involving small businesses as and from 12 November 2016.  A standard form contract is one that has been prepared by one party to the Contract, with the other party having very little, is any, opportunity to negotiate.  Basically it is offered on a take it or leave it basis.

JJ Richards provides recycling, sanitary, and green waste collection services.  The ACCC has considered the following terms in the JJ Richards standard form contract unfair:

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

The ACCC alleges these term are unfair as they create a significant imbalance between the parties, are not reasonable necessary to protect the interest of JJ Richards and have the potential to cause significant financial detriment to a small business.  As such the ACCC is seeking for the terms to be deemed void and injunctions to prevent JJ Richards from relying on those terms for any current or future contracts with small business.

This proceeding serves as a timely reminder that if you are a large business and you haven’t yet reviewed your standard form contracts, now is the time.

If you require advice or further information in relation to any of the matters discussed in this article, please contact our Corporate & Commercial team on 03 5273 5273.