The Gatherer Volume 3

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18|The Gatherer | 19
ACCC I S NOW TARGET ING
UNFAIR CONTRACT TERMS
IN SMALL BUS INESS
CONTRACTS
The ACCC has announced
that the new provisions
extending the unfair
contract protections of the
Australian Consumer Law
(ACL) to small businesses will
be a priority in 2017.
The law to extend the unfair
contract protections of the Australian
Consumer Law (ACL) for consumer
contracts to standard form small
business contracts came into effect
on 12 November 2016.
All standard form small business
contracts entered into or renewed
on or after 12 November 2016 are
governed by the new legislation, as
are terms of pre-existing contracts
that are varied after this date.
The ACCC has warned that it will
be taking enforcement action
against companies across a range of
industries over business to business
unfair contract terms this year.
The ACCC has indicated that it
has received 48 complaints from
businesses about unfair contract
terms since the introduction of the
laws in November 2016. The ACCC
has also confirmed that a number
of investigations have also been
commenced as a result of these
complaints and issues raised in the
recent industry review.
What sort of terms are
‘unfair’?
The ACCC conducted an industry
review in November 2016 and
analysed the provisions of 46
contracts across the advertising,
telecommunications, retail leasing,
independent contracting, franchising,
waste management, and agriculture
sectors. From this review, the
ACCC identified a number of types
of clauses which it considers to be
potentially unfair, which continue to
be used in standard form contracts,
including:
• the right for one party to
unilaterally vary all terms (or
at least important terms) in
an unconstrained way, for
example, without the right of
the other party to terminate
the agreement in light of the
variation;
• broad and unreasonable
powers for one party to protect
themselves against loss or
damage by imposing broad
indemnities or limitations of
liability (e.g. limiting liability
of the larger business where
the larger business is itself
responsible for the loss or
damage);
• the right for one party to
unreasonably cancel or end an
agreement as it suits them; or
• the right to unreasonably limit
or prevent small businesses
from exiting their contracts.
What you need to do
There is quite some uncertainty
as to when the legislation will
apply in any given circumstance,
particular due to the way ‘small
business’ is defined in the legislation.
For example, the drafting of the
legislation means that businesses
may not know whether the regime
applies without enquiring into the
head count of their potential small
business counter-party.
Given these uncertainties, and the
ACCC’s particular focus in this area,
it is imperative that businesses
review all standard form contracts
to if there is a possibility that they
will be entered into with a small
business.
Businesses should review their
standard form contracts to,
at the least, temper the most
egregious provisions particularly
in circumstances where they are
rarely, if ever, relied on.
Alternatively for some agreements,
businesses may look to start
negotiating their terms to avoid the
application of the regime, as the
provisions only apply to standard
form contracts. However, proper
records of such negotiations should
be maintained.