A LEGAL test of new standard-form contract laws protecting small businesses, including farm businesses, in dealings with big businesses has proved them successful.
The Federal Court last week declared eight terms used in standard-form contracts by JJ Richards & Sons Pty Ltd, one of Australia’s biggest privately-owned waste management companies, unfair and therefore void.
Terms found unfair included those granting exclusive rights, ability to unilaterally increase price, ability to charge for service not provided even when the cause was beyond a customer’s control, ability to suspend service but continuing to charge over late payments and preventing contract termination if money was owing.
In resolving proceedings JJ Richards agreed to orders restraining it from relying on the unfair terms in existing small business contracts and from using them in future contracts.
Legal action against JJ Richards was launched by the Australian Competition and Consumer Commission (ACCC) as a test case for standard-form contract laws which came into effect last November.
It stemmed from an ACCC review of some standard-form contracts used in the agriculture, waste management, advertising, telecommunications, retail leasing, independent contracting and franchising sectors.
In agriculture, fruit and vegetable growers’ relationships with agents and wholesalers and in the dairy industry the ability of farmers to negotiate with milk processors was of concern to the ACCC.
A revised horticulture code of conduct setting out mandatory requirements for traders and agents operating in Australian fresh fruit and vegetable markets was released by the ACCC in April.
The code is expected to resolve many supply chain issues individual growers had with larger wholesale distributors.
Similarly, standard-form contract legislation is expected to help even perceived imbalance of obligation between dairy farmer and milk processor when supply contracts are negotiated.
The ACCC will release an interim report on its dairy inquiry on Thursday, November 30, for comment and present its final report on April 30 next year.
ACCC deputy chairman Dr Michael Schaper said the Federal court result in relation to JJ Richards was a reminder to other large businesses they had an obligation to act fairly when dealing with small traders who may be reliant on them.
“The court’s decision serves as a reminder to large businesses to review their standard-form contracts and make sure they don’t include any unfair terms,” Dr Schaper said.
“The ACCC will not hesitate to take appropriate action to ensure large businesses are complying with the unfair contract terms provisions.
“Under Australian consumer law, terms that create a significant power imbalance between parties, are not necessary to protect legitimate interests, and which would cause significant financial detriment to a small business if relied on, are unfair and void.”