In our last Commentary, we discussed the ACCC's action against JJ Richards, which was the first case brought under the extension of the unfair contract terms provisions of the Australian Consumer Law (ACL) to small business contracts. The ACCC subsequently instituted proceedings also against Servcorp Ltd and two of its subsidiaries, similarly alleging that several clauses in its standard form contracts with small business should be declared void on the basis that they are unfair. Servcorp supplies serviced office space and virtual office services such as office suites, secretarial services, IT, communications, and personal assistants.
Some of the Servcorp alleged unfair contract terms include terms that:
- Automatically renew a customer's contract and allow Servcorp to unilaterally increase the contract price after the renewal, and without prior notice to the customer;
- Permit Servcorp to unilaterally terminate the contract and to impose penalties on the customer;
- Unreasonably limit Servcorp's liability or impose unreasonable liability on the customer;
- Permit Servcorp to unilaterally determine whether the contract has been breached; and
- Permit Servcorp to unilaterally acquire the customer's property without any notice.
The ACL has published a list of terms that may be unfair, which is helpful for businesses in undertaking their own assessment of contracts. Many of the terms above appear to explicitly fall within that list; however, businesses should not take this list as exhaustive or definitive. Reviews of standard form contracts should consider the degree of "unfairness" between the parties and the overarching definition of "unfair" provided in the ACL.
These two proceedings will shed some light on the interpretation of the unfair contract terms regime in a small business context. Jones Day has highlighted potential areas of exposure, in particular in relation to clauses seeking to limit liability, unilaterally vary prices or provide indemnity clauses.
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