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How ‘unfair terms’ in your business contracts can land you in hot water!

Apr 30, 2019

The ACCC investigation warns Transport operators, Freight Forwarders and Customs Brokers to take immediate action on amending their business-to-business contracts or face the consequences.


This was no April Fool joke
On the 1st April 2019, Hutchison Ports Australia received the first court enforceable undertaking in relation to their standard contracts containing ‘unfair terms’ for ‘small businesses’. This is following the implementation of amendments made to the Australian Consumer Law in November 2016.

This outcome is significant, as it is the first acknowledgment and legal implementation of the unfair contract terms regime in the Transport sector. The judgment is a warning to freight forwarders, transporters and customs brokers, who must ensure they comply with the relevant legislation.

Click here for an overview by the Australian Federation of International Forwarders (AFIF) on the extension and amendment of the Australian Consumer Law regarding unfair contract laws in business contracts.

Enforceable undertaking on Hutchison Ports Australia

The undertaking includes:

  • Ensure future agreements do not include the Variation Clause or Liability Clause, or terms of similar effect;
  • To not enforce or rely upon the Variation Clause or Liability Clause, or terms of similar effect for customers who have entered into the infringed agreements;
  • Publish a corrective notice on Hutchison’s customer portal and website;
  • Develop, implement and maintain an ACL compliance program.

An enforceable undertaking is an undertaking given to and accepted by the ACCC (when related to the Australian Consumer Law) that is enforceable in a court. These orders are essentially a binding promise made to the court by the party who has made the undertaking.

If broken, the ACCC can apply for a court order to enforce the company:

  • To comply with the terms of the undertaking;
  • Pay an amount equivalent to the financial benefit received by breaching the undertaking;
  • Compensate anyone else who have suffered loss or damage as a result of the breach; or
  • Any other order the court deems appropriate.

Enforceable undertakings are not confidential and appear on a public register. These orders are an alternative means for civil or administrative action where there is an infringement of the legislation. Breaching the enforceable undertaking may result in further fines for contempt of court.

Outcome and effects could be very costly

Hutchison Ports Australia isn’t the only transport company to run into trouble with the ACCC regarding their standard contracts. Both DP World Australia and Victoria International Container Terminal (VICT) were also caught out and have had to remove or amend terms after the intervention.

This undertaking is an added warning to transport operators about the new regulations stopping companies from avoiding liability, where customers are ‘small businesses.’ If you haven’t already, whether you are a carrier or a handler, it is essential you review your contracts (to comply with new laws) and review your liability insurance (to ensure you are correctly covered). If your company fails to take immediate action now, you are potentially open to litigation.

It’s assumed Hutchison Ports Australia, DP World Australia and Victoria International Container Terminal received light penalties for failing to comply with the amended act. Next time a company is caught with unfair terms in their agreement, the party at a loss or the ACCC, may not be so willing to accept an enforceable undertaking. A financial penalty may be the preferred outcome.

 

IMMEDIATE ATTENTION IS RECOMMENDED:

  1. Update and amend contracts signed with “small businesses” (as defined in the act),
  2. Review your current insurance policy to ensure you are correctly covered.

AustBrokers Comsure can assist you in finding the right legal advice to amend these contracts. Furthermore, AustBrokers Comsure insurance policies cover companies in relation to these amendments. To check your policy and discuss any concerns you may have surrounding your small business contracts, contact AustBrokers Comsure for assistance on 1800 122 194.


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