The ACCC has chosen its second target for enforcement of the relatively new extension of the Unfair Contracting provisions of the Australian Consumer Law (Schedule 2 of the
Competition and Consumer Act 2010 (Cth)) (
ACL), which took effect in November 2016. It is alleged that Servcorp Ltd and two of its subsidiaries (
Servcorp) incorporated a number of terms in their standard form contracts that are unfair (and therefore void).
The terms that are alleged to be unfair include:
- automatic renewal of the contracts, with the ability for Servcorp to unilaterally increase certain payment provisions, including prices;
- unilateral termination provisions;
- penalty provisions;
- unreasonable limits on Servcorp’s liability, or unreasonable liability risks placed on customers;
- unilateral ability for Servcorp to determine that a breach has occurred; and
- unilateral ability for Servcorp to acquire their customer’s property without notice.
The matter is ongoing, but the types of terms that are alleged to have been included in Servcorp’s standard form contracts are precisely among those that the new laws were introduced to address. Other terms that may be found to be void for unfairness include those relating to payment terms, notice requirements, interest, assignment, and many more.
What does this mean?
With the introduction of the new laws, the ACCC is on the lookout for potential breaches. Because of this, it is now more important than ever for businesses to ensure that their standard form contracts are ACL-compliant. Businesses who have not conducted a legal review of their standard form contracts since November 2016 are especially vulnerable.
What to do now
When seeking to include onerous terms in a standard form contract that may be entered into with small businesses, it is important to ensure that the term only extends so far as is reasonably necessary to protect your legitimate business interests. It is also important for businesses to gain an understanding of the characteristics of the other parties to their contracts, in order to determine the nature of the law that applies.