The consumer unfair contracts regime in the Australian Consumer Law has been in operation for a number of years. In 2016, the unfair contracts regime was extended to apply to “standard form” contracts presented to “small businesses”.
The “business to business” unfair contract protections apply when the following conditions are met;
- The contract is for a supply of goods or services, or a sale or grant of an interest in land;
- At the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and
- Either of the following applies:
(a) the upfront price payable under the contract does not exceed $300,000; or
(b) the contract has a term of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000.
A recent case involving Hutchison Ports (a large stevedoring company) has shed some light on what the ACCC considers to be unfair terms in a business to business contract.
In order to access Hutchison’s terminal facilities, trucking and transport companies (some of whom were “small businesses” in that they employed fewer than 20 people), were required to sign Hutchison’s Terminal Carrier Access Terms and Conditions (Hutchison Terms).
There were two specific clauses in the Hutchison Terms that drew the attention of the ACCC; the Variation Clause and the Liability Clause.
The Variation Clause
The Variation clause in the Hutchison Terms allowed Hutchison to unilaterally vary its terms and conditions at any time simply by placing a notice on its website. Any transport operator who continued to use the online portal to access Hutchison’s facilities was then deemed to have agreed to the variation.
The ACCC specifically objected to this clause on the basis that it allowed Hutchison to vary any term of the contract (including the fees payable) without a requirement to give a specific period of notice.
The Liability Clause
As is reasonably common in standard form contracts, the Liability Clause in the Hutchison Terms sought to limit Hutchison’s liability as far as possible. There was no corresponding clause limiting the liability of the transport operators who used its facility and it was this disparity that specifically raised the ire of the ACCC.
Hutchison acknowledged that the Variation Clause and the Liability Clause may contravene the small business unfair contract terms provisions of the Australian Consumer Law.
Hutchison provided the ACCC with a section 87B undertaking that it would:
- ensure future agreements, for a minimum period of three years, do not include the Variation Clause or Liability Clause, or terms of similar effect;
- not enforce or rely upon the Variation Clause or Liability Clause, or terms of similar effect for customers that entered into the Hutchison Terms;
- publish a corrective notice on Hutchison’s customer portal and website; and
- develop, implement and maintain an Australian Consumer Law compliance program.
Does your business have a standard set of terms and conditions? Are those terms and conditions one-sided? Are they too heavily stacked in your favour? Most businesses who utilise standard form contracts attempt to “stack the cards” in their favour when drafting those documents.
If small businesses are expected to “sign up” to your “one-sided” terms and conditions, you will need to consider the impact of the business-to-business unfair contract terms. The Hutchison Ports case provides some insight into the types of clauses the regulator considers fall foul of the rules.