Preparing for changes to unfair contract terms law - lessons from Exetel

on Sunday, 07 February 2016.

Preparing for changes to unfair contract terms law - lessons from Exetel

Eager followers of Counsel on Demand Legal Updates (too many to count !) will be aware of changes to unfair contract law terms which will take effect in November 2016 . The changes  are primarily designed to protect smaller businesses from unfair terms in standard form contracts.

Until now, the protections have only applied to mum and dad consumers. However, the new laws mean that small businesses can take advantage of the protections offered . At the same time, a small business which enters into a relevant contract with another business (however small or large the other business) won't be able to rely on an unfair term which the small business tries to impose - it's a two way street. It's not simply a David and Goliath scenario.

The obvious question is 'what is an unfair contract term?". As the law doesn't currently apply to business consumers , for now, we can only look to cases brought in respect of  mum and dad consumers for examples . Telecommunications services provider Exetel was recently pulled up by the ACCC , the consumer champion , in respect of changes to its fixed term residential broadband plans.

The contract in question , included a clause saying that Exetel could vary any part of the agreement for any reason. Exetel then told customers that they must either change their broadband plan or terminate their Exetel service without being compensated for the lost services . The ACCC considered that the clause and associated action was unfair and Exetel subsequentaly agreed to compensate consumers for loss of service - which had the clause remained , they would not have been required to do. So although customers had agreed to a contract which said that the service could be varied at any time , on Exetel's whim, effectively, that term was considered unfair and it didn't stick.

These are just some of the things your business should be doing :-

  • Start now - both the consumer watchdog, the ACCC and ASIC have explicitly stated that they will start reviewing contracts as soon as the law takes effect.
  • Consider what standard form contracts your own business uses for its customers.
  • Consider what standard form contracts you enter into with other businesses, using their standard form contracts.
  • Make sure you understand what you are looking for - what is likely to be an unfair term ?
  • Prepare - if you have annual contracts which automatically renew, they will be caught.
  • Make sure you understand the effect of an unfair contract term - this could be critical if a supplier , for example, is trying to impose unfair terms on your business. That understanding could give you a significant commercial edge.
  • If any of your own terms are unfair, understand that they may well not give you the protection you think they do - be prepared and be ready to make changes.

 The new laws apply to a standard form contract when:

  • One party to a contract is a small business - that is a business with less than 20 employees, including regular casuals ; and
  • The contract is for the sale of goods and/or services (or an interest in land); and
  • The value of the contract is less than $300,000 for an upfront one off price or, if the contract is for more than 12 months, eg a services agreement, up to $1M.

 

 

 

 

Harvey Norman franchisee fined over consumer law failings

on Monday, 25 January 2016. Staff ignorant about consumer rights, heavy cost for retailer

Harvey Norman franchisee fined over consumer law failings

If you are going to operate as a retailer in today's climate, you and your staff must be 100% clear on the legal rights of your customers under Australian Consumer Law (ACL). If you or you or your staff are not up to speed , as a Harvey Norman franchisee discovered recently, it may cost you heavily not just in fines, but in legal costs, loss of business reputation and ongoing compliance costs. The consumer watchdog, the ACCC, is well resourced for keeping a close eye on what it considers to be breaches of the ACL and time and again comes down hard on offending businesses- and small and medium sized businesses are certainly not immune.

A Harvey Norman franchisee, Bunavit Pty Limited, operating out of Bundall in Queensland, was required to pay $52,000 in fines in respect of failings in respect of its obligations under the law. The franchise was told in no uncertain terms that its staff had misrepresented the Australian Consumer law to their customers - hardly the impression a business wants to give in a tight retail market !

In short, the sales staff gave false and inaccurate information to consumers who had purchased faulty goods - including denying the retailer's obligations and the customers' rights in respect of those faulty goods - even telling a customer that they would have to pay to get the goods repaired !

The legal obligations apply just as much to online businesses - and the consumer watchdog is very clear on that - so don't think you can hide behind your website. The ACCC says time and time again that it will come down hard on online and offline retailers who mislead their customers, particularly about their rights under the Australian Consumer Law and this case bears out once more that the ACCC does follow through.

This case brings to a total of $286,000 the amount of fines imposed on Harvey Norman franchisees in respect of false or misleading claims to customers about their legal rights when they purchase goods which do not comply with the Australian Consumer law. The case also shows that a retailer can't fall back on any excuses about how junior the staff handling the customers were - in the Bunavit case, no senior staff were involved.

It is also worth noting that Bunavit has now ceased trading. Whatever the commercial financial or other woes which led to this state of affairs, the action by the ACCC cannot have helped. A sulatary lesson indeed .

A retail business should make sure that ALL staff who are dealing with customers are properly trained in the Australian Consumer Law. The ACCC stated specifically that 'Businesses are expected to take appropriate and effective steps to ensure their staff understand the rights of consumers and the obligations of businesses under the consumer guarantees provided by the Australian Consumer Law .....'.

Counsel on Demand offers legal training tailored to retail businesses wanting to ensure that their staff do not fall foul of the Australian Consumer law. If you would like a no obligation , confidential chat about how we may be able to help you ensure that you and your staff understand the business's legal obligations to its customers, please call me, Polly Harding on 0401 816290 or email me on This email address is being protected from spambots. You need JavaScript enabled to view it.. I am always happy to talk and have considerable experience of handling consumer legal issues for small and large businesses.

 

 

Consumer protection for business customers

on Monday, 04 January 2016.

Consumer protection for business customers

The ACCC , the consumer watchdog, has demonstrated, once again, that it takes the protection of all consumers , including B2B consumers, very seriously.

Following enforcement action by the ACCC, the Federal Court has recently imposed heavy fines on Safety Compliance Pty Limited and personal fines on two directors and the general manager of the company for making false and misleading representations in breach of the Australian Consumer Law. The total fines amounted to $515,000 . The directors and GM were also banned from running a corporation for significant periods of time - in the case of one of the directors, for 8 years.

Safety Compliance sold wall charts and first aid kits to small businesses through telemarketing calls. The company incorrectly told businesses that workplace health and safety laws required businesses to maintain workplace wall charts and first aid kits of the same nature as those sold by Safety Compliance. The company also falsely represented to customers and potential customers that it was affiliated with or actually was a workplace health and safety agency. Each of these factors led the court to find that the company had misled customers into purchasing safety products from them.

These are very steep fines which would put many companies out of business.

As mentioned in previous legal updates this year will see the introduction of new laws protecting small businesses entering into standard form contracts where provisions of those contracts are considered to be unfair.

The case against Safety Compliance is a timely reminder that not only do small and medium sized businesses have extensive obligations to their customers under the Australian Consumer Law but that there are increasing protections for those small businesses . If you are a small or medium sized business owner, it is vital that you understand not only your obligations but how the law protects you also.

If you have any questions about how the Australian Consumer Law affects your business either as a supplier or as customer, Counsel on Demand can help.

Polly Harding - 0401 816290

This email address is being protected from spambots. You need JavaScript enabled to view it.