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ACCC brings first unfair contract terms case

The Federal Court has declared eight contract terms unfair in the first test of the new unfair contracts legislation in ACCC v JJ Richards & Sons Pty Ltd [2017] FCA 1224.

The case is a warning to large businesses to review their standard form contracts and consider revising any clauses that may be rendered void and unenforceable if challenged as "unfair" under the unfair contract laws.

The Court declared that eight contract terms that the waste management company, JJ Richards & Sons used in its standard form contracts with small businesses were unfair and void, by consent. The standard form contract was a two page, terms and conditions service agreement.

The action was the first brought by the ACCC with the following unfair terms identified:

  • An automatic renewal provision binding customers to commit to subsequent contracts unless they cancel the contract within 30 days before the end of the term;

  • A price variation provision allowing JJ Richards to unilaterally increase its prices;

  • A no liability provision removing any liability for JJ Richards where its performance is “prevented or hindered in any way” even where the customer was not responsible for the hindrance or J Richards was better placed to manage. The only requirement for JJ Richards was to use all reasonable endeavours;

  • A provision allowing JJ Richards to charge customers for services not rendered for reasons that are beyond the customer’s control;

  • An exclusivity provision granting JJ Richards exclusive rights to remove waste from a customer’s premises;

  • allowing JJ Richards to suspend its service but continue to charge the customer for costs associated with the overdue payment if payment is not made after seven days;

  • creating an unlimited indemnity in favour of JJ Richards even where the loss was not incurred by the customer or where the loss could have been mitigated or avoided by JJ Richards; and

  • preventing customers from terminating their contracts if they have payments outstanding and permitting JJ Richards to continue charging customers equipment rental after the termination of the contract, despite no services being provided.

The court also went to some length to consider how the various unfair terms interacted together with the effect of amplifying the adverse impact on customers.

This case is a timely warning to review contracts, including standard terms and conditions, which may already be in use to ensure they comply with the new unfair contract laws.

For small business who believe that they have entered into a contract that contains unfair contract terms, you may be able to take steps in relation to those unfair terms.

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