It’s been over a year since the Australian Consumer Law provided that terms that are ‘unfair’ in new or renewed consumer and small business contracts could be deemed void and unenforceable.
This is important if you use a standard form contract for your customers (that is, it’s offered on a ‘take it or leave it basis) because if your standard terms are unfair you can’t rely on them and you might get a fine.
Over the last 12 months the Australian Competition & Consumer Commission (ACCC) has provided guidance to businesses, as well as taking successful court action against businesses that haven’t complied with the laws.
It’s likely that the following sorts of contract terms will be considered ‘unfair’, and business should be concerned if their standard form agreements:
1. Give them a unilateral right to vary all or key terms in an unconstrained manner. These sort of rights should be removed or balanced with a reasonable notice period and a right to end the agreement if the variation is not agreed.
2. protect them against loss or damage at the expense of the customer by imposing broad indemnities or excessive limitations of liabilities. These sorts of terms should only be used to the extent reasonably necessary to protect legitimate interests; and
3. enable them to cancel or end an agreement unreasonably or as it suits. A fair position will depend on the circumstances but generally customers should have the right to rectify a breach and grounds for termination should be limited to those that are reasonable.
Unfair terms aside, at a practical level it’s always worth checking whether your standard form contract actually reflects what you do and the terms in it are actually helpful to your business. You’d be surprised by the good feelings a simple, fair and plain English contract can generate in a customer – it’s good business. We see many businesses with ancient and out of date terms and conditions that could do with a makeover from a legal as well as a customer-friendly perspective.
If you do nothing else, see the ACCC Report which identifies terms that are likely to be considered unfair across a range of industries and provides guidance for how businesses can minimum risks of infringing the unfair contract terms regime.
For further information or advice, please contact: