ACCC enforcing unfair contracts regime

The Australian Competition and Consumer Commission (ACCC) has started enforcing compliance of the unfair contract term provisions that came into effect in November 2016 (check out our article on the regime here).  In 2017 the ACCC took action against JJ Richard & Sons Ltd (JJ Richards) in relation to unfair contract terms in their standard form contracts. [1]

JJ Richards is a privately owned waste management company located in Australia and provides recycling, green waste and sanitary waste collection services. The Federal Court held that the eight terms in the JJ Richards standard form contract, which it used with small business, were unfair. Accordingly, the contracts were void.

The Court found the terms had the effect of:[2]

  • Creating an unlimited indemnity in favour of JJ Richards
  • Preventing customers from terminating their contracts if they have payments outstanding and entitling JJ Richards to contain charging their customers’ requirements rental after the termination of the contract
  • Allowing JJ Richards to unilaterally increase its prices
  • Binding customers to subsequent contracts unless they could cancel their contract within 30 days before the end of the term
  • Removing any liability for JJ Richards when its performance is ‘prevented or hindered in any way’
  • Allowing JJ Richards to charge customers’ fees for services that were not rendered even when the cause of the reason were beyond the control of the customer
  • Granting JJ Richard the exclusive rights to remove waste from a customer’s premises
  • Allowing JJ Richards to suspend its services but continue to charge their customers if payment is not made after seven days

JJ Richards consented to orders that restrained them from relying on the unfair terms in existing small business contracts and in future contracts. A corrective notice was published and a copy of the court orders were given to all small business which were affect by the contract. The court order cancelled 2600 contracts that were issued by JJ Richards.

Implications of the decision

This was the first court proceeding by ACCC to enforce the new prohibitions under the ACL against unfair terms in small business contracts that are issued as a standard form contract for a small business contract.

More onus are placed on larger businesses to review their standard form contracts to ensure that it is not inclusive of unfair terms. Under the Australian Consumer Law, terms that create a significant power imbalance between parties will not necessary protect the legitimate interests of parties and could cause significant financial detriment if they are relied on by small businesses and if unfair will be void.

If you want your standard terms reviewed for compliance with the unfair contracts regime, or advice around how to manage your contracts, check out our article on the legislation,  or contact Michael Morrissey or Hamish Geddes.

[1] Australian Competition and Consumer Commission v JJ Richards & Son Pty Ltd [2017] FCA 1224.

[2] Australian Competition and Consumer Commission v JJ Richards & Son Pty Ltd [2017] FCA 1224.

Disclaimer: This publication by Morrissey Law & Advisory is for general information and commentary only and should not be considered or relied upon as legal advice. Formal legal advice should be sought in relation to any matters or transactions that may arise in relation with communication.

2019-07-02T11:36:20+10:00February 16th, 2018|Commercial & Corporate Advisory, Construction Contracts|