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Frigging triggering - unfair terms examples

Latest update 28/05/2024 | Last update 28/05/2024 | First published 28/05/2024 on TradeBox's website, 15/09/2023 on Aitchison Reid's client newsletter


Frigging triggering - unfair terms examples

This guidance article was provided to TradeBox Australia by Aitchison Reid Building and Construction Lawyers, and written by its director, Fionna.


Have you ever?

Have you ever been in a room, where everyone appears to know what is going on? They're all nodding their heads, making those “aha” and “mm” noises that makes them sound like they are completely on top of it.


But inside you have a voice, that starts as a quiet murmur, like “huh? I don’t get this?”, which is quickly followed by a “What the frigg is going on? This makes no sense!”


As the much younger sister of the family child genius, this was often my place in the world growing up. However, I later discovered that my superpower, is I have no shame in putting my hand up and humbly asking "Did I miss something?"

What the heck does an unfair term look like?

So, if you read my email last week and you thought, “Well that’s great Fionna. You just have told us about the consequences of having unfair terms, but what the heck does an unfair term look like?”


You my friend, are absolutely on point and hopefully this email will give you some insight.


I say “hopefully” because the interpretation of what the law means is still emerging, and I imagine we will see a lot more cases and be given a lot more clarity over the next year or so.

Section 24(1) states that a term is unfair

So going back to Australian Consumer Law (ACL), section 24(1) states that a term is unfair if:


  • There is an imbalance between the rights and obligations of each party to the contract;

  • The term will cause a detriment to a party, if it was relied on; and

  • The term is not reasonably necessary in order to protect the legitimate interests of party which has the advantage of the term.[1]


This last point I will discuss in more detail in a future email, as it can be used as a defence to having unfair terms. Today we are just focusing on the first two points.

Determining whether a term is unfair

The ACL states that in determining whether a term is unfair, the court may take into account such matters as it thinks are relevant, but it must take into account:

“(a) the extent to which the term is transparent;

(b) the contract as a whole.”


Term transparency

In relation to transparency, the Act further explains that for a term to be transparent it needs to be:

“(a) expressed in reasonably plain language; and

(b) legible; and

(c) presented clearly; and

(d) readily available to any party affected by the term.”

The District Court and term transparency

On the point of transparency, the District Court in Perera v Bold Properties (QLD) Pty Ltd [2023] QDC 99 (‘Perera v Bold’) held that:


  • When looking at whether the term had been readily available, the court needs to have regard to the type of contract and if there are any legislative requirements for the contract, such as the requirements for domestic building contracts;

  • The transparency of the term (which in that case was a price escalation clause) was reduced by the term failing to identify how the new price was to be calculated; and

  • Lack of transparency by itself does not make a term unfair.

Unfair terms examples

But still, I hear you, “but, what the frigg is unfair?” “how unfair does a term need to be to be considered "unfair"?”


Well the ACL goes further and gives examples of what unfair terms are, which I've listed below (section 25). WARNING: Subcontractors may be triggered and disturbed reading the below list as you've probably seen all of these in your subcontracts:

“(a) a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract;

(b) a term that permits, or has the effect of permitting, one party (but not another party) to terminate the contract;

(c) a term that penalises, or has the effect of penalising, one party (but not another party) for a breach or termination of the contract;

(d) a term that permits, or has the effect of permitting, one party (but not another party) to vary the terms of the contract;

(e) a term that permits, or has the effect of permitting, one party (but not another party) to renew or not renew the contract;

(f) a term that permits, or has the effect of permitting, one party to vary the upfront price payable under the contract without the right of another party to terminate the contract;

(g) a term that permits, or has the effect of permitting, 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;

(h) a term that permits, or has the effect of permitting, one party unilaterally to determine whether the contract has been breached or to interpret its meaning;

(i) a term that limits, or has the effect of limiting, one party’s vicarious liability for its agents;

(j) a term that permits, or has the effect of permitting, one party to assign the contract to the detriment of another party without that other party’s consent;

(k) a term that limits, or has the effect of limiting, one party’s right to sue another party;

(l) a term that limits, or has the effect of limiting, the evidence one party can adduce in proceedings relating to the contract;

(m) a term that imposes, or has the effect of imposing, the evidential burden on one party in proceedings relating to the contract;

(n) a term of a kind, or a term that has an effect of a kind, prescribed by the regulations”


Now, it is important to understand that the above list is just a list of examples. The scope of what an unfair term is, can be much broader.


In fact in Perera v Bold, the court referred to the concept of “unfair” as being open-ended. In other words, when considering whether a term is unfair, the courts will look at broadly expressed concepts and the purpose, rather than analyse the term strictly or technically. This may mean that what is interpreted as an "unfair term" is going to be broad.


What does this mean for you?

For so long our industry has been led to believe that the best way to do business is by effectively screwing the other party down with layer upon layer of unfair terms.


But the ACL and the unfair term regime, means that parties will have to actually provide fair terms (or bear the consequences of providing unfair terms), which hopefully means fairer outcomes, for small businesses and consumers. So this is a great thing, especially if you are a subbie and/or small business.


However, if you provide your own terms, it is time to wake up and take a cold hard look at your own trade terms. Do your terms contain any of the unfair terms listed by the ACL? And what are you going to do about it?

 

End notes

[1] This is my plain English interpretation of what section 24(1) states, if you want to read the section, please see the legislation at: https://www.legislation.gov.au/C2004A00109/latest/text/4

 

Please note

This article was written by Fionna C A Reid, director of law practice Aitchison Reid Building and Construction Lawyers (Aitchison Reid) for TradeBox Australia (TradeBox), so that TradeBox can share the article as guidance with tradies and subbies. Use of this article is subject to TradeBox’s terms and conditions of use stated here: https://www.tradebox.com.au/terms-and-conditions-our-ar-content


Aitchison Reid, like TradeBox, is based in Queensland.


This article has been drafted in reference to building and construction trade businesses in Queensland only.


TradeBox is not a law practice. This article is not legal advice and is for guidance purposes only. Seek advice on matters of interest arising from the commentary, information and guidance in this article.


Aitchison Reid’s content for this article was released to TradeBox for TradeBox to share with its customers, prospective customers, alliance partners and other parties. Individual liability limited by a scheme approved under professional standards legislation.


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