This is the fourth bulletin in an ongoing series that looks at how the recent “unfair contract terms” legislation can affect your business.
The takeaways from our third bulletin include the following:
It goes without saying that being able to identify a term that is unfair (and therefore illegal) is crucial to ensuring you’re on the right side of the unfair contracts term legislation. That is, being able to identify an ‘unfair term’ will allow you to take appropriate action and:
For these reasons, we will now look at another real life example of what constitutes an ‘unfair term’.
You might still have a hard-copy Yellow Pages book lying around at home or in the office. Amongst other things, Sensis provides advertising services to businesses via the Yellow Pages and also the White Pages.
The relevant national regulator, the Australian Competition & Consumer Commission (“ACCC”), investigated Sensis’ standard form small business contracts after receiving a large number of complaints from Sensis’ small business customers.
The standard form small business contracts in question related to Sensis’ Yellow Pages and White Pages ‘bundled packages’ (“Package Contracts”), which had a monthly fee with a 12-month minimum contract period.
The ACCC raised concerns that the following terms in Sensis’ Package Contracts were unfair (“Sensis’ Unfair Terms”):
In light of the ACCC’s concerns, Sensis agreed to make the following changes to Sensis’ Unfair Terms:
With respect to the terms themselves, one can appreciate how each of Sensis’ Unfair Terms were capable of meeting all three criteria for an ‘unfair term’. Looking at some of the criteria more specifically however, the Cancellation Fee Term for example is quite clearly unnecessary for the protection of Sensis’ interests. Meanwhile, the Without Cause Term quite blatantly causes a significant imbalance between Sensis’ rights and its customer’s.
Furthermore, it is telling that what caused Sensis to change the terms in its Package Contracts was not legal proceedings, but simply complaints by customers to the ACCC (albeit a large number of them). It seems that the stigma and reputational risk that comes with being potentially in breach of the relevant legislation, at the expense of small businesses, is enough to convince large businesses such as Sensis to accept the ACCC’s concerns and toe the line.
As mentioned in our previous bulletin, we recommend that if you have concerns about unfair terms in small business contracts that you have not prepared but are a party to, it would be prudent of you to have a legal professional review the contract in question.
With respect to small business contracts that you actually prepare however, ideally you ought to have these terms reviewed as they are being formulated so that any potential ‘unfair’ terms are nipped in the bud.
Stay tuned for our next bulletin, where we will consider what it means for a term in a small business contract to be transparent.