Fair laid bare

The new ‘small busi­ness’ con­trac­tual regime hits home for JJ Richards

Australian Transport News - - Contents - Mau­rice Ba­roni is a bar­ris­ter at Den­man Cham­bers. Nick Leon is an as­so­ciate at McCabe Lawyers T: 02 9264 5541 E: m.ba­roni@den­man­cham­bers.com.au

The new ‘small busi­ness’ con­trac­tual dilemma hits home

“It serves as a warn­ing to all trans­port op­er­a­tors”

O n Novem­ber 12, 2016, the un­fair con­tract term pro­vi­sions in the Aus­tralian Con­sumer

Law (ACL) were ex­tended to cover terms of stan­dard form in­volv­ing small busi­nesses.

The Aus­tralian Com­pe­ti­tion and Con­sumer Com­mis­sion (ACCC) has re­cently com­menced pro­ceed­ings taken in the Fed­eral Court against large pri­vately owned waste­m­an­age­ment fi rm JJ Richard & Sons Pty Ltd ( JJ Richards).

This is the fi rst of its kind and, in our view, many more will fol­low.

It serves as a warn­ing to all trans­port op­er­a­tors to re­view the con­sumer con­tracts they have with small busi­nesses. THE JJ RICHARDS CASE The ACCC has al­leged that, un­til earlier this year, JJ Richards en­tered into stan­dard form con­tracts with a num­ber of small busi­nesses which con­tained terms that the ACCC al­leged are un­fair. With­out go­ing to the de­tail of the un­fair con­tracts laws, gen­er­ally a term of a con­tract with a small busi­ness will be “un­fair” if it: • Causes a sig­nif­i­cance im­bal­ance in the par­ties’ rights and obli­ga­tions un­der the con­tract • Is not rea­son­ably nec­es­sary in or­der to pro­tect the le­git­i­mate in­ter­ests of the party who would be ad­van­taged by the term • It would cause detri­ment (whether fi nan­cial or oth­er­wise) to a party if it were to be ap­plied or re­lied on. Such a term may be de­clared void and un­en­force­able.

While the fi rst court ac­tion in this space, JJ Richards is not the only com­pany to have been or is be­ing in­ves­ti­gated by the ACCC.

Uber, Fairfax and Lend Lease Prop­erty Man­age­ment are also in the process of be­ing in­ves­ti­gated.

THE AL­LE­GA­TION

The ACCC al­leges JJ Richards’ con­tracts with its cus­tomers con­tain eight un­fair con­tract terms: 1. Bind­ing cus­tomers to com­mit to sub­se­quent con­tracts un­less they can­cel the con­tract within 30 days be­fore the end of the term 2. Al­low­ing JJ Richards to uni­lat­er­ally

in­crease its prices 3. Re­mov­ing any li­a­bil­ity for JJ Richards where its per­for­mance is “pre­vented or hin­dered in any way” 4. Al­low­ing JJ Richards to charge cus­tomers for ser­vices not ren­dered for rea­sons that are be­yond the cus­tomer’s con­trol 5. Grant­ing JJ Richards ex­clu­sive rights to re­move waste from a cus­tomer’s premises 6. Al­low­ing JJ Richards to sus­pend its ser­vice but con­tinue to charge the cus­tomer if pay­ment is not made af­ter seven days 7. Cre­at­ing an un­lim­ited indemnity in

favour of JJ Richards 8. Pre­vent­ing cus­tomers from ter­mi­nat­ing their con­tracts if they have pay­ments out­stand­ing and per­mit­ting JJ Richards to con­tinue charg­ing cus­tomers equip­ment ren­tal af­ter the ter­mi­na­tion of the con­tract. The ACCC is seek­ing dec­la­ra­tions from the Court that the terms are un­fair and thus void.

It is also seek­ing in­junc­tions to pre­vent JJ Richards from re­ly­ing on those terms with ex­ist­ing cus­tomers and from en­ter­ing into fu­ture con­tracts with small busi­nesses that con­tain those terms.

LESSONS

The case is a re­minder to busi­nesses to take par­tic­u­lar care to re­view the terms of their con­tracts with small busi­nesses and as­sess whether the terms can be jus­ti­fied as rea­son­able be­fore im­pos­ing them.

De­ter­min­ing whether some terms are un­fair can be com­plex, with a num­ber of terms likely to fall within a grey area.

Any term would need to be con­sid­ered in the con­text of the con­tract as a whole, in­dus­try prac­tices and whether the in­ter­est be­ing pro­tected can be pro­tected through an al­ter­na­tive (and fairer) ap­proach. The ACCC’s guid­ance on un­fair con­tract terms has iden­tifi ed com­mon, which in­clude: • Uni­lat­eral vari­a­tion of rights • Lack of rec­i­proc­ity • Au­to­matic re­newal • Wide in­dem­ni­ties • Liq­ui­dated dam­ages.

While it will be the courts that ul­ti­mately de­ter­mine whether a term is un­fair un­der the ACL, the ACCC’s guid­ance will help to serve as a use­ful safety check for all trans­port op­er­a­tors when pre­par­ing new con­tracts for small busi­nesses. Of course, the same prin­ci­ples will ap­ply to re­view ex­ist­ing con­tracts.

Ul­ti­mately, if a le­git­i­mate in­ter­est can be pro­tected with­out “skew­ing” the con­tract, then this may be prefer­able to risk­ing the en­tire clause be­ing ren­dered void and un­en­force­able.

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