The First Unfair Contract Terms case has been delivered – ACCC trashes JJ Richards’ standard form contract terms

October, 2017

By Frazer Hunt, Partner

On 13 October 2017, the Federal Court of Australia delivered the first judgement* under the unfair contract terms provisions of the Australian Consumer Law, declaring various clauses in JJ Richards & Sons’ standard form contracts for waste management services to be unfair and void.   This was the first court case brought by the ACCC under new laws protecting small businesses from unfair contract terms which commenced on 12 November 2016. The court granted injunctions restraining JJ Richards from relying on the unfair terms and from entering into standard form small business contracts containing any of these terms.

The eight unfair terms are described below:

The court emphasised that the unfair terms tended to exacerbate each other by interacting in a way that increased the overall imbalance between the parties and the risk of detriment to customers. For example, two of the terms arguably had the combined effect that JJ Richards could attend the customer’s premises to collect the waste outside of the agreed times, fail to collect it and still charge the customer. Another example was a scenario where a customer sought to terminate an automatically renewed contract, but had not paid for the first week’s service under the renewed contract — it was arguable that JJ Richards was entitled to leave unwanted equipment on the customer’s property and continue to charge the customer for it.

Overall, these clauses were held by the court to go beyond what was necessary to legitimately protect JJ Richards’ interests, and that these terms would cause detriment if relied upon by JJ Richards. In circumstances where all of the JJR Waste Management Contracts were standard form contracts, it followed that, insofar as the terms were contained in small business contracts, they were void under s 23(1) of the Australian Consumer Law.

The unfair contract terms provisions of the Australian Consumer Law have yet to be tested in the transport sector.  If you provide goods and services in the transport sector, you should review your standard form contracts as it is almost certain that at least some of your customers will be small businesses that are caught by this new regime. The case is a reminder to businesses to take particular care to review the terms of their standard form contracts and assess whether the terms can be justified as reasonable before imposing them on small businesses.

*ACCC v JJ Richards & Sons Pty Ltd [2017] FCA 1224.

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Frazer Hunt | Partner
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