Our regulators often get criticised for not being proactive when it comes to looking after those businesses in a vulnerable position due to a lack of bargaining power. Well, the ACCC has quickly moved to give one company an intended roasting for some of its unfair contract terms.
Let’s quickly chip away at some facts
- In November 2016 the B2B unfair contract terms provisions in the ACL came into effect.
- Contracts covered by the ACL apply where one business employs less than 20 people and the up-front price payable does not exceed $300k (or up to $1m for contracts running more than a year).
- Mitolo is the largest potato wholesaler in Australia and enters into exclusive supply agreements with potato farmers for resale to supermarkets and the grocery trade.
- The ACCC has alleged these contracts have several unfair provisions including: –
- Mitolo has the unilateral right to determine or vary the price paid to the farmer
- Mitolo can unilaterally determine “wastage” without any review regime
- Mitolo can prevent farmers from selling potatos to alternative purchasers
- Mitolo can prevent a farmer from selling his farm unless the purchaser enters into similar contracts
Why is this such a hot potato issue?
You might be surprised when you carefully consider your own Terms of Trade or Contracts.
At Ledlin Lawyers, we often see businesses who have added a mish-mash of clauses over time because “we used this in our last job and it worked OK” or “we just want to cover anything and everything that could go wrong!”.
Truth be told, we even had one person say, “there’s no difference between your clause and our clause, they are just words!”. Okay Mr Potato Head, try telling that to the Judge when your Contracts are under fire for being unfair!
Turn down the heat – what you can do about unfair contracts today
Please do not get caught up in the clauses bake-off, your Terms of Trade are the contractual basis of your relationship with your Customer and your business can easily be undermined if you are not careful. Dare we say it, unfair contract terms can be a recipe for disaster.
Set aside some time today to read over your own Terms of Trade – put yourself in the shoes of your Customers and think about whether there is any imbalance in what they can and can’t do, compared to what your business can and can’t do. For example, does your business have all of the termination rights and none for your Customers? If you think some clauses might be unfair, get an expert to review them for you.
One last thing to remember – any Chef will tell you that good food takes time to properly prepare. It’s the same with your Terms of Trade, careful consideration of the needs and requirements of your business and industry will serve you much better than some half-baked attempt by an apprentice.
Want some more ingredients for that perfect serving of Terms of Trade with bespoke trimmings?
Contact us now on (02) 8488 3389 before you get burnt.