Unfair contracts and small business – ACCC takes waste management business to Court

Demonstrating the ACCC is focused on the enforcement of the new unfair contracts regime, the ACCC has instituted Federal Court proceedings against JJ Richards & Sons Pty Limited (JJ Richards), a major Australian privately-owned waste management business.  The ACCC alleges eight clauses in JJ Richards’ standard-form small business contract are unfair under the Australian Consumer Law, rendering them void.

As the first case of its kind in Australia, it will be a test case and will shed light on the way Courts interpret unfair contracts provisions in the context of small business contracts.

In 2016, we reported on the types of contracts which would be caught by the regime.  We also provided examples of clauses which would be considered “unfair”.  A fuller list of those examples is found in section 25 of the Australian Consumer Law.

Many of those examples are reality in the JJ Richards case.  According to the ACCC, the allegedly unfair clauses provide, in JJ Richards’ favour:

  1. the customer will be bound to a subsequent contract unless the customer terminates the contract within 30 days before the end of the contract term;
  2. a right to unilaterally increase its prices;
  3. a broad and unbalanced exclusion of liability (that is, operating in circumstances where JJ Richards’ performance of the contract is “prevented or hindered in any way”);
  4. a right to charge customers for services that are not performed, where the reason for non-performance may be outside the control of the customer;
  5. an exclusive right to perform certain services;
  6. a right to suspend the service while continuing to charge the customer if payment is not made after seven days;
  7. an unlimited indemnity; and
  8. the ability to prevent customers from terminating the contract if payment is outstanding, while allowing JJ Richards to continue charging customers for equipment rental after the contract is terminated.

In the case, the ACCC will seek declarations the relevant terms are unfair and, as a result, void.  It will also seek injunctive relief to prevent JJ Richards from relying on those terms or from entering into further contracts with small businesses that contain those terms.

The ACCC has not indicated it will seek monetary compensation for persons affected by the allegedly unfair terms in the present case.  However, businesses should be aware that this remedy may be available on the application of any person who suffers loss as a result of a breach of the unfair contracts provisions and note the ACCC can seek that remedy on such a person’s behalf.

As we have recommended previously, businesses should have standard-form contracts closely scrutinised against the requirements of the Australian Consumer Law if it deals with small businesses or consumers on a regular basis.  This message is especially important now, given the ACCC’s willingness to flex its enforcement muscle in the Courts.

For more information, please contact us.

This article was written by Murray Taylor, Lawyer – Commercial.