In November 2016, the Australian Consumer Law (ACL) introduced new protections for small business. These prevent (often larger) businesses from trying to rely on unfair contract terms.
The Federal Court recently decided the first court case on this legislation. The case involved waste management giant, JJ Richards1.
This case confirmed that many large businesses have not made their contracts fairer. In fact, the court said several common clauses were void and unenforceable. We see these types of clauses regularly in The Fold’s Contract Review Service.
You can challenge unfair terms
Small businesses are now in a much stronger position to challenge these terms. You can ask for them to be removed or re-drafted for a fairer outcome.
Some of the contract terms that the court struck out for being unfair include:
While each individual clause protects the legitimate business interests of JJ Richards, collectively the court said they were unfair and in breach of the law. They created a power imbalance between JJ Richards and their customers.
Indemnity clauses will be fairer
It’s very common for one party to transfer all their legal liability to another in a contract. Following this case, indemnity clauses are now fair game. They may be attacked by the ACCC if they are one-sided and unfair.
The best way to achieve a fairer outcome is to use common sense when negotiating indemnity clauses. This may include:
So, what can you do now?
Indemnity clauses are not going to disappear anytime soon. But it’s unlikely that one-sided indemnity clauses will survive for much longer.
If you’re a large business, avoid seeing the ACCC in court by reviewing your standard contract terms and finding a position that is reasonable and fair. This should take into account the financial resources and insurance policies of the businesses you’re contracting with. It should also consider what level of protection your business really needs.
If you’re a small business, you now have the power to negotiate fairer contract terms from the outset.
Author: Lydia Carstensen
1 ACCC v JJ Richards & Sons Pty Ltd  FCA 1224