Life can be unfair – but your contract shouldn't be!

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The ACCC has again displayed its appetite for enforcing the law when it comes to unfair contract terms.

The ACCC has taken the printing company, Fuji Xerox Australia Pty Ltd (Fuji) to court, alleging that:

nine types of Fuji’s standard form contracts contain 173 unfair contract terms;
there are 31 different unfair terms, including automatic renewal terms, excessive exit fees and unilateral price increases; and
these unfair terms have been used in contracts between Fuji and its small business customers for the supply of printing goods and services since at least October 2018.

The ACCC is seeking the following from the Federal Court:

declarations that the terms in existing contracts between Fuji and its small business customers are unfair and therefore void;
an injunction to prevent Fuji from relying on these terms in its current contracts or entering into future contracts that contain those terms;
a corrective notice;
an order for Fuji to enter into a compliance program; and
costs of the court proceedings.

What is so unfair?

The Australian Consumer Law contains provisions which are designed to protect small businesses and consumers from unfair terms in standard form contracts. A standard form contract is a contract which is usually offered by one party to the contract to the other on a 'take it or leave it' basis where the other party has little or no opportunity to negotiate the terms.

For standard form contracts with small businesses, these provisions apply to standard form contracts entered into, renewed or varied on or after 12 November 2016 where:

the contract is for the supply of goods or services or the sale or grant of an interest in land;
at least one of the parties is a small business (employs less than 20 people, including casual employees employed on a regular and systematic basis); and
the upfront price payable under the contract is no more than $300,000 or $1 million if the contract is for more than 12 months.

Some terms that may be unfair include (but are not limited to) terms that enable one party (but not another party) to the contract to:

avoid or limit their obligations under the contract;
terminate the contract;
penalise the other party for breaching or terminating the contract;
vary the terms of the contract;
automatically rollover the contract;

Ultimately it is up to the Court to decide whether a term in unfair or not.

Don't be the next Fuji - Get it right or pay the cost

The costs of responding to an ACCC investigation plus the costs of any court proceedings commenced by the ACCC are a high price to pay for any business – not to mention the damage to brand reputation.

In addition, if a court or tribunal finds that a term is ‘unfair’, the term will be void and the parties will not be bound by that term. If the contract is incapable of operating without the unfair term, then the entire contract may be void.

As seen in the Fuji case, the ACCC may also seek other orders from the Court to remedy the breach.

The ACCC is also advocating for a change to the Australian Consumer Law to enable courts to impose penalties where businesses use and benefit from unfair contract terms.

How can we help?

If you need to have your standard form contract reviewed, or if you have been approached by the ACCC about your standard form contract, please contact our commercial team.

The material in this article was correct at the time of publication and has been prepared for information purposes only. It should not be taken to be specific advice or be used in decision-making. All readers are advised to undertake their own research or to seek professional advice to keep abreast of any reforms and developments in the law. Brown Wright Stein Lawyers excludes all liability relating to relying on the information and ideas contained in this article.

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Corporate & CommercialLauren CantNovember 10, 2020Gena Kawaguchi, Suzanne Howari