Unfair Business to Business Contract Terms

The recent decision of the Federal Court by the ACCC in its case against Servcorp a large serviced office provider is a timely reminder for all businesses to review their terms of trade and to remove any terms which may go beyond protection of legitimate business interests-especially in dealing with a smaller business interest. The consumer law as applies to unfair contracts was extended to cover B2B contracts in 2016.

The Court declared by consent that 12 terms in contracts used by Servcorp subsidiaries are unfair and therefore void.

The specific contract terms declared unfair included those:

  • that had the effect of automatically renewing a customer’s contract;
  • allowing Servcorp to increase the contract price;
  • permitting Servcorp to unilaterally terminate contracts;
  • unreasonably limiting Servcorp’s liability; and
  • permitting Servcorp to keep a customer’s security deposit if a customer failed to request its return.

ACCC deputy chair Mick Keogh said “Businesses can no longer impose contract terms that create a significant power imbalance between parties, are not necessary to protect their legitimate interests, and which would cause significant financial detriment to a small business.”

“While penalties do not apply for unfair contract terms, the ACCC will continue to take matters to court to ensure these terms are declared void and protect businesses.”

Following the Court’s declaration, Servcorp was required to pay the ACCC’s costs and establish an unfair contract terms compliance program.

If you have any concerns about the fairness of any of the terms of any contract affecting your business interests, please contact us for advice.

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