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Is your contract unfair? It may be void!

Is your contract unfair? It may be void!

The Australian Consumer Law provides that unfair terms in contracts between consumers or small business with each other, or with big businesses, are void. These provisions have real teeth and are changing the way that big business (and other businesses) in Australia contracts with its customers. All 4 major banks announced earlier this year that they are changing their consumer and small business contracts to remove unfair terms.

The ACCC recently launched legal action against JJ Richards & Sons Pty Ltd and obtained a Federal Court order that various terms in the JJ Richard’s customer contract were unfair and thus void. Those terms included terms that :

  • bound customers to subsequent contracts unless they cancelled the contract within 30 days before the end of the contract term

  • allowed JJ Richards to unilaterally increase its prices

  • removed any liability for JJ Richards where its performance was “prevented or hindered in any way”

  • allowed JJ Richards to charge customers for services not rendered even when caused by reasons beyond the customer’s control

  • granted JJ Richards exclusive rights to remove waste from a customer’s premises

  • allowed JJ Richards to suspend its service but continue to charge the customer if payment is not made after seven days

  • created an unlimited indemnity in favour of JJ Richards

  • prevented customers from terminating their contracts if they have payments outstanding and entitling JJ Richards to continue charging customers equipment rental after the termination of the contract.

See the ACCC’s press release for more details:

These terms are not that unusual in customer contracts and it is likely that you have signed a contract with an unfair term.

Under the Australian Consumer Law, a term of a contract is unfair if:

  1. would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and

  2. it is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and

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

Some types of terms in contracts, and some contracts, are excluded from the operations of unfair contracts provisions.

Even if you have agreed to a contract, and signed that contract, if the contract has unfair terms, those terms may be void.

If you have a customer contract that contains terms similar to those above, it may be void for unfairness, depending upon the circumstances. Come and see us for specific advice.

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