Since 2016, the Australian Government has been proactively seeking to rectify imbalances created by unfair contract terms and their potential impact on small business. With the Coalition back in power, if pre-election promises to amend the unfair contract term provisions of the Australian Consumer Law are implemented, numerous parties within the transport and logistics sector are likely to be captured off-guard.
Currently, many parties within the sector fall outside the ambit of Australian Consumer Law (ACL) unfair contract term provisions (UCT). UCT provisions relating to small business presently apply:
- to standard form contracts or the supply of goods or services (or a sale or grant of an interest in land) – put simply, “standard form contracts” are contracts tabled on a ‘take it or leave it basis’);
- where one party is a ‘small business’ [currently business employing less than 20 people at the time the contract was entered];
- where the upfront value of the contract is valued under $300, 000, or under $1 million if the term of the contract is greater than 12 months;
- the contract was entered, varied or renewed after 12 November 2016;
except where an exemption or other limitation applies [for example under clause 28 ACL] or the contract was entered (but not otherwise renewed or varied) before the 12 November 2016.
Previous Assistant Treasurer Hon Stuart Robert indicated in October 2018 the government would amend the Australian Consumer Law to give greater protection to small business. Following the recent review into unfair contract terms relating to small business, Hon Stuart Robert, in a joint media release, stated: “[that] the review found while the current UCT regime…has improved protections to small business in certain industry sectors, it does not provide strong deterrence for businesses to not use UCT and therefore does not afford appropriate protections to many small businesses…”
Hon Stuart Robert indicated the following potential amendments:
- Making UCTs illegal and attaching civil penalties to breaches;
- Redefining small business for the purposes of the protections as a business that employs fewer than 100 persons at the time the contract was entered into or had an annual turnover less than $10 million (the current threshold is less than 20 employees);
- Broadening the coverage of small business contracts by removing the value threshold (the threshold is currently $300, 000 or $1million where a contract is over 12 months)
- Further clarifying the definition for a standard form contract;
- Extending the UCT protections to government contracts; and
- Considering exempting ‘minimum standards’ prescribed by state and territory laws.
In our view, transport and logistics standard form contracts (including freight and haulage, third party logistics, supply, stevedore and freight forwarding) often include potentially unfair provisions. In our experience, common terms found in transport and logistics contracts which are potentially unfair, both under current law and future amendments include (but are not limited too):
- Unilateral ability to amend contract terms
- Total limitation/exclusion of liability to customers and prime contractors
- Extending contractual benefits to third party subcontractors (Himalaya clauses)
- Indemnification even when the transport/logistics provider is negligent or in breach
- Significantly reducing the standard limitation period to bring a suit in contract/tort (e.g. to 3, 9 or 12 months)
- Requiring a party to submit notice of claim within a short period after an incident, otherwise, provider excludes liability (e.g within 7 – 14 days)
- examples of potentially unfair contract terms are also found in section 25 ACL.
The ACCC powers to issue section 155 Notices to investigate potential unfair contract terms was extended in October 2018. The ACCC is aware of the prevalence of unfair contract terms in the sector and has successfully prosecuted industry members, for example, see the 2017 case of J&J Richards. More recently, the ACCC has successfully required three stevedore companies to amend their contracts with land transport operators after concerns were raised that provisions were unfair. Hutchison Ports Australia also entered into a court-enforceable undertaking with the ACCC. We consider it probable some members of the transport and logistic sector will receive section 155 notices in the foreseeable future. Stay tuned for our article on section 155 Notices.
Recent developments in Australian Consumer Law have changed the playing field for the transport and logistics sector. Further changes are on the horizon, which look set to shake up the industry further. All parties within the sector need to consider their obligations under the ACL UCT provisions, especially in light of anticipated changes and the ACCC’s new power to issue section 155 notices to investigate potential unfair contract terms.
To have your contract terms reviewed by a solicitor experienced in both unfair contract term review and the transport and logistics sector, contact Kelly Tudhope, solicitor of Hope Law Pty Ltd www.hopelaw.com.au.