Business Contracts – Know your entitlements

Business Contracts – Know your entitlements

Written by Eugene Reinboth

The Australia-wide law protecting consumers from unfair terms in standard form consumer contracts came into effect on 1 July 2010. That law was extended to business to business contracts entered into or renewed on or after 12 November 2016.

So, if a business prepares and offers you a contract on a ‘take it or leave it’ basis (i.e. you have little or no opportunity to negotiate the terms), it is likely to be a standard form contract. The business-to-business unfair contract terms law applies to contracts for the supply of goods, services, or the sale or grant of an interest in land, where:

  • at least one of the parties is a small business (that employs less than 20 employees, including casual employees) and
  • the upfront price payable2 under the contract is no more than $300 000 (or $1 million if the contract is for more than 12 months).

To be unfair, a term must:

  • cause a significant imbalance in the parties’ rights and obligations, and
  • not be reasonably necessary to protect the legitimate interests of the party advantaged by

The term, and

  • cause detriment (e.g. financial) to a small business if it were applied or relied upon.

As a business, you may be required to enter into standard form contracts with other businesses for goods (e.g. equipment, stock) and services (e.g. internet, banking, utilities, removal services, waste management services, franchise agreements). The Australian Consumer Law (ACL) now prohibits unfair contract terms in most of these contracts.

A few weeks ago the Australian Competition and Consumer Commission (ACCC) took proceedings in the Federal Court in Melbourne against a waste management services company JJ Richards & Sons Pty Ltd.

The Court said that the automatic renewal, price variation, agreed times, no credit without notification, exclusivity, credit terms, indemnity and termination clauses were unfair contract terms and were void by operation of the ACL. The decision applied to at least 26,000 contracts.

The company had to publish in a prominent place on the home page of the respondent’s website, on its customer portal, and any other URL used by it to market and supply waste management services a corrective notice. They also had to at their own expense, within 14 days of the date of this order, provide a copy of the orders to each person who is a party to a standard form contract entered into, or renewed, by the respondent after 12 November 2016 with the exception of parties who were not a small business.

Obviously, the company has suffered bad publicity on top of the legal orders made against it.

With that in mind, it is useful for businesses to check their contracts to avoid issues with unfair contract terms. If you have any questions in relation to contracts or would like a business contract reviewed call us on 82121322 to speak to one of our experienced commercial lawyers.

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