The November 2016 amendments to the Australian Consumer Law (which extended the prohibition on ‘unfair terms’ to contracts with small businesses) are starting to bite. Enforcement action by the ACCC since the amendments were introduced have demonstrated the Commission’s strong desire to get tough on onerous standard terms contracts.
Under the amended legislation, some contracts with small businesses containing terms which:
- may cause ‘significant imbalances’ in the respective bargaining positions of the parties;
- aren’t ‘reasonably necessary to protect a party’s legitimate interests’; or
- cause detriment to the weaker party;
may be unenforceable.
Among the sorts of provisions attracting attention in recent enforcement action by the ACCC (such as those brought against JJ Richards and Servcorp) are:
- terms containing unreasonable indemnities;
- clauses allowing one party to unilaterally vary pricing and/or contract terms;
- terms mandating automatic contract/ service renewals; and
- clauses requiring exclusivity in business dealings with one supplier.
The above are mere examples of common types of contract terms which have come into sharp focus under the new enforcement regime. Only time will tell whether the ACCC widens its aim to target other terms it deems to be ‘unfair’
Given the guidance from recent ACCC enforcement action, now is an ideal time to review your standard terms to eliminate overly onerous provisions which are potentially unenforceable under the unfair contracts regime.
If you require assistance with a review of your standard terms of trade, Rankin Business Lawyers can provide on-point, practical guidance to help ensure your business contracts are enforceable and compliant.