What is the legislation relating to unfair contract terms?

How many contracts do you think your business relies on to get things done?

Have a think about it… you might have a couple of suppliers, a few service providers. You might not realise how many contracts your business is a party to. After all, you have many competing priorities for your attention.

But the thing is, businesses should care about their contracts just as much as they care about their relationships with customers.

Why?

Because contracts are, when it boils down to it, all about relationships as well; key relationships that are an essential part of ensuring your business continues to flourish. Some contracts you can negotiate but others are imposed on you on a “take it or leave it basis” with little or no opportunity to negotiate.

Thankfully, as of late 2016, the law gives small businesses some protection against harsh contracts. To be precise, the law protects small businesses from “unfair terms” in certain contracts by making such terms illegal.

The effect of this legal protection from unfair terms has been widespread.

The Australian Competition and Consumer Commission (“ACCC”), sometimes referred to as Australia’s “consumer watchdog”, has been cracking down on companies that use unfair terms in their contracts. Well-known companies such as Ashley & Martin and Advanced Hair Studios have been sued by the ACCC for relying on unfair terms. The ACCC has itself reported that other household names such as Uber, Fairfax, and Lendlease have amended their contracts in response to the ACCC’s concerns that certain terms in those contracts may have been unfair, and therefore illegal.

So, what does this all mean for you?

Well, it could be the case that certain contracts you have had to endure may contain unfair terms. If you can spot and call out an unfair term, you could save your business a lot of trouble.

Similarly, if you are a business that likes to drive a hard bargain, it would be worthwhile reviewing your contracts to ensure the ACCC doesn’t have grounds to label any terms in your contracts as ‘unfair’.

To give you an idea, terms that the courts have considered unfair include terms that allow a business to:

charge a customer for services, even though the business hasn’t provided those services; and

increase the price of services without telling the customer.

It’s not as straightforward as it seems though. In fact, there’s quite a lot to unpack when it comes to unfair terms. Over the next few weeks we will help you navigate the area of unfair terms.

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