Clifford Gouldson Lawyers

JJ Richards offers warning to others over unfair contract terms rules

Print Version

2/11/2017

In a recent Federal Court decision, JJ Richards & Sons' (JJ Richards) standard contract with small businesses was found to be unfair under Australian Consumer Law.

They were in the unfortunate position of being one of the first companies to feel the Australian Competition and Consumer Commission's (ACCC) wrath in protecting small businesses from unfair contracts.

We spoke to representatives from JJ Richards about the case who were keen to warn other businesses about the issue.

Jason Doig, JJ Richards' Toowoomba Trade Waste Manager, said, "Businesses should act now to ensure their terms and conditions do not infringe the unfair contract provisions."

"The ACCC took action against us even though there had not been any complaints from our small business customers," he said.

"We had never sought to be unfair with our contracts.  Our contracts were previously regarded as the most flexible in the waste industry.  The law moved the goalposts."

"We don't want to see other local businesses in the same situation."

JJ Richards did not oppose the action instituted by the ACCC and worked co-operatively with them to reach consent on the orders made by the Federal Court. 

The case

Since the Australian Consumer Law amendments became effective on 12 November 2016,  JJ Richards has entered into, or renewed, over 26,000 contracts.

Recently, the ACCC argued in the Federal Court that JJ Richards’ standard contract with small businesses contained terms that were unfair under section 24 of Australian Consumer Law.  That section states that a term in a small business contract is unfair if it:
 

(a)   would cause a significant imbalance in the parties' rights and obligations arising under the contract; and

(b) is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and

(c) would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

Court Decision

Justice Moshinsky found the following JJ Richards’ terms to be unfair:
 

  1. binding customers to subsequent contracts unless they cancelled the current contract within 30 days of the contract expiring;
  2. allowing JJ Richards to unilaterally increase its prices for any reason;
  3. completely eliminating JJ Richards’ liability where its performance is ‘prevented or hindered in any way’;
  4. allowing JJ Richards to charge customers for services which were not provided even when the inhibiting circumstances were outside of the customers' control;
  5. granting JJ Richards exclusive rights to remove waste from the individuals’ premises;
  6. permitting JJ Richards to suspend their waste management service at any stage with the ability to charge the customer if they do not receive payment within seven days; and
  7. preventing individuals from terminating their contract with JJ Richards if they have outstanding accounts and subsequently allowing JJ Richards to continue billing customers for equipment rental after they have attempted to terminate the contract.

As these terms were found to be unfair, they were all rendered void and unenforceable.

Takeaways

Although contractual terms are often used as a means of protection, there is a fine line between protecting your interests and going too far.  If your terms are found to overstep the mark, you will be left with no protection at all.

The key point in the warning offered by JJ Richards is that you need to consider whether your existing arrangements, which may have been considered fair for many years, are still fair for small businesses under the current Australian Consumer Law.

If you’re concerned that your standard terms and conditions might be considered unfair, please contact our Litigation + Dispute Resolution Team who will review your standard contract and advise whether it is too much in your favour.

Further reading

For more information on these changes refer to our previous articles on this topic.  In September 2015 and November 2016, we wrote about these changes coming into effect and in August this year,we wrote about one of the first cases involving those new laws.



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