Back in November 2016, the ACCC published a report introducing a new framework aimed at protecting small businesses by identifying areas of concern (i.e. unfair provisions) in standard form contracts.
We now have some substantive guidance as to what a court considers to be "unfair" in the context of this framework. In a recent decision, the Federal Court dealt with one of Australia's largest privately-owned waste management firms, JJ Richards & Sons' (JJR), and found that the T&C's in its standard- form contract contained a number of provisions that were prejudicial to small businesses. As a result, where the other party to the contract was a small business, the offending provisions in all JJR's supply contracts for waste collection services were declared void.
This proceeding is the first of its kind, and provides insight into how the courts will apply the ACCC's unfair contracts scheme. The court identified 8 terms in JJR's standard form contracts as being unfair, among them:
- an automatic renewal clause;
- a clause giving JJR a unilateral right to vary the contract price;
- an unlimited indemnity clause; and
- a clause prohibiting customers from terminating the agreement with outstanding payments due, but allowing JJR to continue charging the customer.
So, what does this mean for your businesses?
This case serves to remind businesses of the need to consider any terms in their contracts that impose disproportionately onerous terms on small business customers. B2B suppliers of goods or services should check and audit their existing supply contracts to determine whether the terms are reasonably necessary to protect their own position.
All eyes are now on the ACCC's new proceedings against Servcorp Ltd to see where this goes next...