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Shining a light on unfair contract terms in the agriculture sector

You may not be aware, but the Australian Competition and Consumer Commission (ACCC) is reviewing the competitiveness of the agriculture sector, shining a light on different sectors including beef, dairy and the horticulture sector.

At the same time, the Australian Consumer Law (administered by the ACCC) has recently extended its unfair contract term regime to small businesses including agribusinesses.  With the ACCC's focus on the agriculture sector, we think they will be very interested in standard form contracts of small agribusinesses which contain the same kind of unfair contract terms which they have just taken a waste management company to court over in a ground-breaking "test case".

In the test case, the Court found eight contract terms "unfair" making those terms "void and unenforceable" against the customer by the waste management company (Company):

1.  Automatic renewal: binding customers to subsequent contracts unless they cancel the contract within 30 days before the end of the term;
2.  Unilateral price increases: allowing the Company to unilaterally increase its prices;
3.  No liability for non-performance: removing any liability for the Company where its performance is “prevented or hindered in any way”;
4.  Charges for services not provided: allowing the Company to charge customers for services not rendered for reasons beyond the customer’s control;
5.  Exclusivity: granting the Company exclusive rights to remove waste from a customer’s premises;
6.  Suspension of service: allowing the Company to suspend its service but continue to charge the customer if payment is not made after seven days;
7.  Unlimited indemnity: creating an unlimited indemnity in favour of the Company; and
8.  Unfair termination: preventing customers from terminating their contracts if they have payments outstanding and entitles the Company to continue charging customers equipment rental after the termination of the contract.

The ACCC is concerned about all types of unfair contract terms - you may be bound by a contract with unfair terms that are not listed above.     

My contract contains terms that might be "unfair" – what next?

Issues of unfairness will likely be resolvable by re-negotiating the unfair terms while the rest of the contract continues on as before.  It's unlikely you would have to go to court to resolve any issues we know that relationships with big purchasers or suppliers are important and that disputes can be costly.  However it benefits both parties to identify "unfair" contract terms early and agree on a way to resolve the issue before something goes wrong.  

You might be able to save yourself a lot of heartache down the track by simply reviewing your contracts now, to see whether there is anything you can do to make them compliant with the new law.  Even if you trust the company who's standard form contract you have signed, or none of these "unfair" contract terms have been enforced, you cannot know what will happen in the future.

It's best to deal with these issues now, as it is in neither sides' interest to have unenforceable terms lurking in their agreements. 

We are here to help

Given the ACCC's spotlight on the sector, we will shortly be conducting a survey of Horticultural standard form contracts to identify whether there are many "unfair" terms in contracts being used in the sector.  We can then work with small producers to take the next step in resolving any issues relating to unfair contracts, with a focus on maintaining good relationships with larger suppliers and buyers.

We will launch the Unfair Contract Term Survey later in the year here on the AustralianFarmers website.

MinterEllison has strong agribusiness credentials, read more about our clients here and what we can do for you here.

Authors: Andrew Gill (Partner) and Anna Crowley (Associate) at MinterEllison, Canberra

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