Servcorp and Unfair Contract Terms


Have you ever signed a standard form contract? Well, the terms of your standard form contract may be unfair. If it is unfair the contract will be void. This means the contract is not binding and cannot be enforced against the parties. Read on to find out why your contract may be unfair.

 

Recently the Federal Court declared that Servcorp’s standard form contracts between businesses were unfair. As a result they were void.

 

Why were they unfair?

 

1. The contracts allowed one party to change terms unilaterally.

2. They created unreasonable liability for the customer and none for the business.

3. The contracts allowed Servcorp to keep their customer’s security deposit if the customer failed to request a return of the deposit.

 

What does this mean for businesses?

 

The Australian Competition and Consumer Commission have declared that businesses cannot impose contract terms that are “not necessary to protect their legitimate interests”.[1]

 

A standard form contract cannot create a substantial power disparity between the business and the customer through:

1. Unilateral terms

     1.1.   A standard form contract cannot include terms that enable the business to unilaterally change a                term without consent from the customer.

     1.2.   These terms could be in relation to:

               1.2.1.      Changing the contract price;

               1.2.2.      Automatic renewal of the contract; and

               1.2.3.      Termination of the contract.

2. Unreasonable liability

      2.1.   A standard form contract cannot include liability and indemnity clauses that benefit the business                 only.

      2.2.   The contract cannot place an unreasonable financial disadvantage on others.

      2.3.   This may occur if a term places unlimited liability on the customer or unreasonably limited                            liability on the business.

 

What can you do?


1. Don’t sign anything before reading the contract;

2. Negotiate with the business and ask them to remove or amend it;

3. Talk to a lawyer.

 

For future information, please contact one of our friendly staff at Bambrick Legal today.

 
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[1] Australian Competition and Consumer Commission, Servcorp’s business contract terms declared unfair (13 July 2018) < https://www.accc.gov.au/media-release/servcorp%E2%80%99s-business-contract-terms-declared-unfair >.