This is the third bulletin in an ongoing series that looks at how the recent “unfair contract terms” legislation can affect your business.
The takeaways from our second bulletin include the following:
Now that we’ve considered what contracts are small business standard form contracts (and are therefore affected by the unfair contract terms legislation) we will now turn our attention to what makes a term in such a contract ‘unfair’.
A term in a small business standard form contract is ‘unfair’ if the term meets all of the following criteria:
The relevant law actually sets out many examples of unfair terms, such as:
Whether or not a term is ‘unfair’ will also depend on how “transparent” the term is. We will consider what “transparent” means in relation to unfair terms in an upcoming bulletin.
To give you a ‘real world’ idea of what unfair terms look like, it is worthwhile briefly considering the case of ACCC v JJ Richards.
JJ Richards & Sons provides commercial and domestic waste management services.
The Federal Court of Australia decided in late 2017 that eight of the terms in JJ Richards’ small business standard form contract were unfair contract terms. This means that each of the eight terms met all three criteria for an unfair term as listed above.
Those eight unfair terms included the following:
You will notice that the common thread between these terms is that they all blatantly advantaged JJ Richards at the expense of the customer.
Sometimes, an unfair term in a small business standard form contract will be quite easy to spot because of how obviously a party is advantaged and another party disadvantaged. On other occasions though, where for instance a term is lengthy and quite complex, identifying whether or not the term is ‘unfair’ may be a more difficult task.
Therefore, whether you are concerned about being on the receiving end of an unfair term, or concerned that terms in the small business standard form contracts that you rely on may be considered unfair, it is worthwhile asking yourself the following basic ‘diagnostic’ questions:
If you answered ‘yes’ to any of the above questions, the term is not necessarily unfair. However, it may be prudent of you to have a legal professional review the contract in question.
As they say, prevention is better than cure; what may be a slight inconvenience now to have the small business standard form contracts that you are a party to reviewed could save your business a lot of trouble later on.
Stay tuned for our next bulletin, where we will consider another case that helps illustrate what an unfair term looks like.