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ACCC Acts in Response to Alleged Unfair Contract Terms

By William McKenzie

16th November 2020

In October 2020, the Australian Competition and Consumer Commission ('ACCC') commenced proceedings in the Federal Court against Fuji Xerox Pty Ltd ('Xerox'), seeking:

  • Declarations that terms in Xerox's standard form business contracts are 'unfair' within the meaning of the Australian Consumer Law (with the consequence being that the terms are void and unenforceable); and
  • An injunction to restrain Xerox from relying on these terms in future contracts.

The ACCC have alleged that the terms in question relate to unliteral price increases, automatic renewals and excessive exit fees.

Under the Australian Consumer Law, a term of a consumer contract or small business contract is considered to be unfair if it:

(a) Would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and

(b) Is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and

(c) Would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

Specific examples of unfair terms are provided in the legislation and include:

  • A term that permits one party (but not another party) to terminate the contract;
  • A term that permits one party unilaterally to vary the characteristics of the goods or services to be supplied, or the interest in land to be sold or granted, under the contract; and
  • A term that permits one party (but not another party) to renew or not renew the contract.
  • While action has been taken by the ACCC in this instance, the Australian Consumer Law provides standing to any party to an affected contract to seek the same remedies in Court.

News of the action taken by the ACCC is a timely reminder for businesses relying on standard form contracts to reconsider specific terms which may appear to go further than is reasonably necessary. The news also serves as a reminder to business consumers of some of the protections that are available under the Australian Consumer Law.

If you would like to know more about unfair contract terms or the Australian Consumer Law more generally, please do not hesitate to contact our Litigation workgroup.

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