The new laws apply to contracts that are deemed to be in “standard form”, are “consumer contracts” or “small business contracts” and that have “unfair terms”.
Given that the laws affect more contracts offered by PCOs and event organisers, it’s important for planners to review their standard contracts now, to make sure they’re not falling foul of the revised laws.
New legal definition for what counts as a standard contract
Traditionally a standard form contract was a pre-printed form, offered on a “take it or leave it” basis. Now, a wider definition of a standard form contract includes contracts prepared before negotiations commence and documents that have been used before. Use of a template contract to supply goods or services will qualify as a standard form because you have used it before.
If genuine negotiations with the client ensue, this may mean they fall outside of the new, extended definition of a standard contract, but there is a presumption that your contract is a standard form unless you can prove that it is not.
When you present a template contract to a client, you should avoid language that discourages negotiations. You should also avoid pressuring the client to sign and return the agreement in a short timeframe. The client must be given a reasonable time to consider the document, to obtain legal advice and to negotiate with you.
Your client service/supply contracts are clearly in the frame, but if you deploy contracts for attendees, sponsors or exhibitors, they are also likely to be standard form contracts because they are presented, usually online, with little or no opportunity to negotiate. Therefore, these should also be reviewed.
Small business contracts are part of the new laws
The new laws apply to consumer contracts and small business contracts. A consumer contract is a contract for the supply of goods or services that are ordinarily and predominantly for personal or domestic use or consumption. This is of less relevance to PCOs and event managers, whose contracts are mostly for the supply of business services. However, it would apply, for example, to the sale of food and beverage to conference attendees.
The definition of a small business contract is broader and more relevant to event organisers as it captures any supply of goods or services where either party employs fewer than 100 full-time equivalent employees or has an annual turnover of less than AU$10 million. Consequently, most contracts used by PCOs and event managers and many event hosts will be small business contracts and the new laws will apply.
What are “unfair” terms?
A term will be unfair if it causes a significant imbalance in the parties’ rights and obligations, is not reasonably necessary to protect the legitimate interests of the party advantaged by the term, and would cause detriment (financial or otherwise) if relied upon.
The law lists several kinds of clauses that will give rise to scrutiny, but the list is not exhaustive and any term can be unfair if it meets all of the criteria above. The new rules will apply (at least) to the following kinds of clauses:
- one-sided limitations of liability
- one-sided indemnities
- unilateral rights to change the contract
- imbalanced termination or cancellation rights
What are the consequences?
The laws prohibit offering terms that are unfair and relying on or enforcing them. If a term is found to be unfair, the court can hold the unfair term to be void and unenforceable. In addition, the laws provide for penalties of up to $2.5 million for an individual and up to $50 million (or more) for a corporation.
Accordingly, it is desirable to promptly amend your template events contracts to remove unnecessary imbalances that may lead to their being held to be “unfair” terms, with potentially severe consequences.
Matt Crouch is the principal of Matt Crouch Legal and can be contacted on matt@crouchlegal.com.au.
