Check contracts to ensure they conform to new legislation

Contracts

The development of this code is instrumental in protecting dairy farmers from unfair clauses and protecting our processors from incurring millions of dollars in fines.

By John McQueen, Interim ADF Chief Executive Officer

The new unfair contract terms law is a priority for the ACCC in 2017.

It will ensure small businesses, including those which are farms, receive the right type of protection.

We have been advised that the ACCC will be taking enforcement action against a number of companies across a range of industries over business-to-business unfair contract terms this year.

For the past six months, ADF together with State Member Dairy Organisations and Processor Members of the ADPF have been working on the Code of Practice for contractual agreements between farmers and processors.

The development of this code is instrumental in protecting dairy farmers from unfair clauses and protecting our processors from incurring millions of dollars in fines. Now with full industry support, the Code of Practice is due to be finalised shortly.

The ACCC has reinforced the importance that if you operate a small business, you may be required to enter into standard form contracts with other businesses for goods and services.

All dairy farmers should check the contracts they have with suppliers of inputs, like grain, to ensure they conform to the new legislation. The Australian Consumer Law now prohibits unfair terms in most of these contracts.

In their communications, the ACCC stated that it was no secret that traders (typically larger businesses) put potentially unfair clauses in their agreements, such as terms that give them:

  • an unreasonable ability to cancel or terminate an agreement
  • broad and potentially unreasonable powers to protect themselves against loss or damage
  • the ability to unilaterally change the terms of the contract
  • unilateral discretion to reject or downgrade produce
  • an unreasonable ability to limit or prevent small businesses from exiting their contracts.

To be ‘unfair’, a term must:

  • cause a significant imbalance in the parties’ rights and obligations
  • not be reasonably necessary to protect the legitimate interests of the party advantaged by the term, and
  • cause financial or other detriment (such as delay) to a small business if it were relied on.

If you come across terms in a standard form contract you have been offered or you have entered into, and which you think may be unfair, you can report it to the ACCC Infocentre

For more information, including the definition of a small business and the meaning of ‘unfair’ contract terms, please see the ACCC website

-ADF

 

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