Faithful readers will recall from our January 2016 Newsletter the heads up about unfair contracts legislation that took effect November 2016. The first legal case using this legislation has now bitten its first victim. In essence, a company can not enter into a contract that creates a significant power imbalance between the parties. The easiest way to think of this legislation is “Do unto others as you would have them do to you” – if your contract doesn’t meet this requirement, it is illegal. Click here for the full details.
The ACCC won its test case (against JJ Richards, but they won’t be the only company) on a number of grounds. Those clauses that could be applicable to our industry include:
- Unilateral ability to increase prices
- Stipulating unlimited indemnity
- Controlling cancellation conditions, such as notice periods, and putting in penalties if customers cancelled contracts.
- Giving a company exclusive rights to provide a good or service
As 97% of Australian businesses are small businesses, any company now using Standard Form contracts is most likely in breach of these laws. Whether you are a customer or supplier, you need to be aware of the Unfair Contracts provisions, as it could render the whole contract void, meaning a court can deem that it never existed and everything in it is unenforceable.