ACCC successfully enforces new unfair contract terms laws in Federal Court
Australian Competition & Consumer Commission v JJ Richards & Sons Pty Ltd  FCA 1224
A recent Federal Court of Australia case has showcased the first, and successful, attempt by the consumer watchdog, the Australian Competition and Consumer Commission (ACCC), to rely upon new laws designed to protect small businesses from unfair contract terms.
By pursuing this action, the ACCC sent a powerful message that it will no longer permit large businesses to rely on the power imbalance between themselves and smaller entities.
The ACCC pursued JJ Richards (the Company), a large, privately-run, waste management company.
In reviewing the contractual terms provided by the Company to its small business customers in some 26,000 relevantly identical contracts, the Federal Court concluded that eight clauses in those contracts were unfair and therefore void. This was because that, if upheld, the terms would, amongst other things:
- permit unilateral price increases by the Company;
- essentially remove any liability to the Company;
- permit the Company to impose fees for services not rendered;
- grant the Company exclusive waste-removal rights;
- permit the Company to suspend services, but continue to charge, if payment not rendered in time; and
- create an unlimited indemnity to the Company even where the customer was not at fault.
The Court found that the balance of the contracts (outside the unfair terms) did little to improve the unfair terms, and the unfair terms in turn exacerbated each other, adding to the power imbalance and risk of detriment to the customers.
By consent, the Company agreed to not rely on the impugned terms in contracts already executed, and to remove them from future contracts. The Company also agreed to institute an Australian Consumer Law compliance program for all employees as to its Australian contracts.
This serves as a reminder to large businesses to review their standard form contracts.
The ACCC will no doubt instigate more litigation to define the limits of the new laws and to set precedent. Indeed, still pending are the ACCC’s proceedings against an office space and virtual office services supplier, to prevent it from relying on terms that permit it to unilaterally increase its contract price, terminate its contracts and limit its liability.
We also expect that subcontractors will rely on the unfair contract terms laws as a defence to contractual claims brought by principals and head contractors.
Date: 31 October 2017