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What clauses can you legally use to lock your customers into contracts?

Wouldn't it be great to lock in your customers to a 12 month contract which:

  1. Automatically renews every 12 months without needing to tell the customer that the contract is coming to an end
  2. Contains an early termination / exit clause where the customer has to pay 92.5% of the remaining payments to end the contract early
  3. Where the customer needs your permission to share the benefits with someone else
  4. Where you have 28 days to remedy a breach of contract but the customer has only 14 days

The 'phone words' contract used by 1300 Australia contained all these clauses ... until last Friday when the consumer and small business watchdog, the ACCC, ‘persuaded’ 1300 Australia to remove these clauses from their contracts.

The ACCC used the Australian Consumer Law (the ACL) to force 1300 Australia to remove these clauses. The ACL makes unfair clauses in a contract void, which means they are treated as if they were never in the contract in the first place.

If you are a business which has standard contracts with unfair clauses, you may have a rude awakening when you find that your early termination clause is not legally enforceable. It's worth reviewing and replacing the unfair contract clause with a fair clause.

For more information click on my article 1300 Australia to remove unfair contract terms from its phone word agreements. At the end of the article is a marketing analysis by Michael Field which explains why 1300 Australia inserted those clauses.


If your Uber Eats meal arrives spoilt or not at all, who pays?

Is it the customer who orders, is it the restaurant which cooks, or is it the courier who delivers the meal? Who pays if the meal arrives spoilt or not at all?

Let us start with the customer. They order a meal from a restaurant using their Uber Eats app. They pay with their debit card or credit card. They wait 20 minutes for the meal to arrive. If it does not arrive, or is cold when it should be hot, or is spoilt, they complain to Uber Eats. Uber Eats will credit the cost of the meal. The customer is not out of pocket.

Let's look at the courier. They pick up the meal from the restaurant, and promise to deliver it in 20 minutes. They place it into their insulated delivery bag. If they do not keep it properly packed, it will go cold, or be spoilt. If they can't find the delivery address, it will not be delivered. There's a good argument that the courier should bear the cost.

Finally, the restaurant. They cook the meal. They pack it carefully to keep hot. The courier collects the meal as soon as it is ready. There's a good argument that if the meal is handed over to the courier good to eat, that the restaurant should be entitled to keep what they are paid for the meal.

Until now, the reality has been different.

Because Uber Eats controls the delivery and also collects the payment from customers, it decided to use its terms and conditions to exempt itself from liability for meals arriving spoilt or not at all. The terms provided that if the customer asked for a refund, then Uber Eats would take it from the payment to the restaurant, and keep its delivery charge.

The consumer watchdog, the ACCC has branded this an unfair term and has force Uber Eats to take responsibility to refund the payment to the customer if the meal arrives spoilt or not at all.

To read my case note on the ACCC's action click on ACCC forces Uber Eats to change its liability exclusion clauses


Is a company director personally liable if they order goods or services without the money to pay?

Your business is failing. The unpaid invoices are piling up.

Should you have one last throw of the dice, and make one last order from a supplier without having the money to pay, hoping to sell the items for a profit and keep the business afloat?

It's tempting ... particularly if you operate your business through a company, which is a separate legal entity which shields its directors from personal liability by limiting liability to the assets of the company.

But how effective is the shield of limited liability?

The Corporations Act removes the shield of limited liability when a company director incurs debts if their company is unable to pay its debts as they fall due - what the Act calls 'insolvency'. A liquidator is able to recover those debts from the company director personally.

In a recent decision of the NSW Supreme Court, the directors of a company were ordered to personally pay $115,000 to the liquidator of their company to pay for debts incurred.

The liquidator's task of proving that the company was insolvent was made easy by the fact that the directors did not produce company financial records, and so the liquidator was entitled to the presumption of insolvency extending back for a period of 7 years.

If your business is failing, don't keep trading. And get some professional advice on going into administration or liquidation to avoid becoming personally exposed to debts.

For my case note click Is a company director personally liable if they fail to keep financial records?

Do criminal records expire?

It seems unfair that a person who has 'done the crime and served the time' will have their criminal conviction held against them forever.

We are talking about all kinds of convictions: with fines, community orders, and with imprisonment of up to 30 months. Not included are fines received in the mail for traffic offences and other minor offences (they are not criminal convictions).

The Federal Parliament agreed it was unfair and so in 1989 amended the Crimes Act to introduce a 'spent convictions' scheme. It was particularly concerned that offences committed by young offenders (such as malicious damage, minor assaults, drug offences) should not be held against them forever if they were not repeat offenders.

The way it works is that if a person is convicted, and has no more convictions recorded for 10 years, then the conviction will ‘disappear’. It will not appear on a Police Clearance Certificate, which is a prerequisite for many government jobs, licences and security clearances. There are exceptions: sexual offences and offences against minors (under the age of 18 years) are never ‘spent’.

Recently, the High Court of Australia ruled that a 'spent conviction' could not be taken into account by ASIC as evidence of dishonest conduct when it was considering whether an applicant for a credit licence was "a fit and proper person to engage in credit activities".

For more information, click on my case note The High Court rules that a criminal record is not forever

Will your terms and conditions stand up in court?

Standard form contracts come with terms and conditions - the fine print (T&Cs) which are carefully drafted to protect the business by removing rights customers have.

The business has the upper hand. Even if they wanted to or knew what to ask for, customers don’t negotiate changes to the standard T&Cs. They are ‘take it or leave it’.

Enter the consumer watchdog - the ACCC. Term by term, the ACCC is using its powers to remove unfair contract terms from standard form contracts. It is removing unfair contract terms for the benefit not only of customers, but also small businesses (which employ to 20 people and where the contract price is $300,000 upfront or $1 million over more than 12 months).

What examples are there of unfair terms which the ACCC has had removed?

  • Price increases without notice and without the right to terminate the contract
  • Automatic rollovers at the end of the term unless (6 months) notice is given not to renew or a termination fee is payable
  • 'No responsibility' terms where the provider is not liable for any loss
  • 'No refund' terms where the order cannot be delivered or the customer cancels

If your terms and conditions contain these terms, they should be removed and re-drafted because they will not stand up in court.

For a more detailed analysis, click on my article Focus on unfair contract terms: Variation and Liability Clauses

Are you a small business and unhappy with a 'take it or leave it contract' from a large supplier?

The rule is that when you tick the box: I accept the terms and conditions - you cannot complain later, no matter how unfair the terms are.

But no longer - This year, small businesses joined consumers in being able to challenge unfair terms in standard form contracts, by virtue of an amendment to the Australian Consumer Law. And the Government watchdog - the Australian Competition & Consumer Commission (ACCC) is leading the way in cracking down on unfair terms in small business contracts.
Here are some examples of unfair terms which are void i.e. are no longer enforceable:

  • Automatic Renewal - The Contract is automatically renewed for the same term unless a 60 days notice of cancellation is given before the current period ends.
  • Unilateral Variation - The Contract allows the supplier to increase prices to pass on any increases in costs, without being limited to unavoidable increases such as tax increases.
  • Limited Liability - The Contract provides that the supplier is not liable if it fails to provide the services or goods at the agreed times or cancels its services or deliveries.
  • Early Termination Payments - The Contract requires payment of all that is owing and what is payable to the end of the term, even if the Contract is terminated early.

According to the ACCC, unfair terms in Contracts are prevalent in these industries: Advertising; Telecommunications; Retail Leasing; Independent Contracting; Franchising; Waste Management and Agriculture.

Suppliers need to urgently review their Terms and Conditions to remove unfair terms, otherwise the ACCC will crack down on them.

Last week, the ACCC successfully had JJ Richards Waste Management remove eight unfair terms from their standard form contract. For my case note click - The Federal Court declares eight standard form contract clauses to be void because they are unfair to small businesses

It's not unfair to dismiss an employee who has been under-performing

To be successful, a mushroom farm must deliver quality produce to its customers.

Mushroom pickers are trained to take the mature mushrooms, and to discard spotted and diseased mushrooms and wet mushrooms. They are paid a piece rate per box, The payment is higher for boxes of A-grade mushrooms than B-grade mushrooms.

Two pickers, husband and wife, decided to take short cuts. They filled their boxes half way with "rubbish mushrooms" and topped the boxes with A-grade mushrooms. The employer did not have the ability to check each box, and so they were sold to the customer as A-grade mushrooms.

The customer re-packaged the mushrooms into trays for sale, and discovered the "rubbish mushrooms". They returned the boxes on three separate occasions, and asked for a refund as they had paid for A-grade mushrooms. Each time, the boxes returned had the picker numbers of the husband and wife. Each time, the husband and wife were given a warning.

The customer was a large customer, and on the third time, they sent a letter to advise they would cease business if this happened again. This was the trigger which led to the pickers being dismissed, not with notice, but summarily (on-the-spot).

The FairWork Commission decided this was not an unfair dismissal because there was good reason. To read my case note click - Fair Work uses common sense to find an employer had just cause to summarily dismiss an employee

Sleaze has no place in the workplace

88% of sexual harassment complaints made to the Australian Human Rights Commission are workplace related.

Unwanted and uninvited 'sharing' of sexual explicit photos and sexy texts and making comments of a sexual nature, are two forms of sexual harassment.

In a recent decision by the Fair Work Commission, a Cabin Crew Supervisor on an unnamed airline was accused of sexual harassment which was primarily directed to female flight attendants. It took these forms -

  • By mobile phone The employee showed sexually explicit photos and sexy text messages from a crew member with whom he was having a sexual relationship, to other flight crew members on several occasions.
  • By shouting "I hope you are clean” to the crew member the day after he began his relationship with her, in the presence of other flight crew members on the aerobridge.
  • By whispering to a female flight attendant, his ‘ratings’ of female passengers as they boarded the aircraft: “She’s got great tits” and “She’ll be great in bed”.
  • By propositioning a female work colleague at the airline’s Christmas Party: “I really want to have a threesome with you XXX and YYY (her flatmate). Oh, sorry, I mean a foursome with ZZZ”.

This behaviour caused the work colleagues to feel humiliated, uncomfortable and awkward. As one said, he was a "creep".

Rejecting protests by the employee that his behaviour was part of the workplace culture where “nothing is really off limits, it’s pretty out there…” and that “almost every flight, the talk would turn into a discussion on sex”, the Commissioner found that the airline had good reason to dismiss the employee with immediate effect.

For more information click - Is sexual harassment a good reason for an airline to dismiss a flight crew member?

Has another business started using your name? What can/must you do to stop them?

Sydney Medical Services has provided after-hours doctors for home visits since 1971 in the Sydney Metropolitan region. Last year. it had 76,885 home visits.

Imagine its surprise when early this year it noticed brochures advertising Sydney Medical Services 2020 for after-hours doctors for home visits, and a website which looked very much like its own website.

A copycat business was using its name to lure its customers!

How could this happen? Doesn't registration on the National Names Register mean that a competitor cannot register a similar name?

Sadly, no. A copycat competitor can register a nearly identical name, if they are good enough to circumvent the same name filters the Registry uses.

That is where you need a good lawyer and marketing consultant who will suggest variations you can register, and domain name and trade mark registrations, to protect one of your most important business assets - your name.

The lawyer will also be able to obtain a Federal Court order to stop the copycat using your name. In the case of Sydney Medical Services, the Federal Court ordered the copycat business to stop using the name.

For more information on business name protection click - What must a business owner do to protect against a copycat name?

Is there anything you can do to stop a law suit by a $2 company from going ahead?

$2 companies are companies with no money. They often bring speculative law suits claiming tens or even hundreds of thousands of dollars in compensation for business opportunities which did not go ahead or which turned out badly.

Defending law suits brought by $2 companies is time consuming and expensive, especially when they go all the way to a court hearing which lasts 2 or more days. This applies of course to all law suits, but the particular problem with law suits brought by $2 companies is that if the defence is successful, the $2 company has no money to pay the legal fees the court orders to be paid by it - they simply go into liquidation to avoid payment.

Smart lawyers have a way of dealing with $2 companies bringing speculative law suits. They 'cut them off at the pass' by bring what is called a 'security for costs' motion.

What a security for costs motion does is to force the $2 company to pay into court the estimated amount of the legal fees the defence will incur in defending the law suit. And if the amount ordered is not paid, the law suit is 'stayed' (i.e. stopped), permanently.

Rules apply as to when you can and cannot succeed in a security for costs motion. For a case study, click - Is there reason to believe that a costs order will not be able to be paid?

Are you debt collecting? If so, make sure that you use mild (not undue) harassment and firm (not coercive) demands to avoid breaching the Australian Consumer Law

When debt collecting, make sure you don't go over-the-top when making threats to the debtor to press for payment.

Don't threaten legal sanctions like bankruptcy, visits from Sheriffs' Officers, seizure of assets, judgments, unless you have commenced legal proceedings. Don't threaten public disclosure of the debt to friends or the employer. Don't add exorbitant additional fees for late payment or every time you make a demand.

It is important to not unduly harass or coerce a debtor in these ways when pressing for payment. Otherwise you may fall foul of the Australian Consumer Law.

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ASIC cracks down on irresponsible lending practices for consumer credit

It’s easy to dismiss the large penalty against The Cash Store for contravening the consumer credit law as a warning for payday lenders only.

ASIC does not see it that way. Responding to the case, ASIC (the Australian Securities and Investments Commission) has issued this warning to the whole consumer credit industry:

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FINKS FOLLY - there is (almost) no consumer protection for business loans

Fink’s case shows just how hard it is for a small business owner to challenge a business loan debt using consumer laws and codes.

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In this article, we give you a basic understanding of how partnering can be used to develop a relationship between businesses.

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This article looks at protection strategies for names as business names, company names, domain names and names and also logos as trade marks, before and after a similar name or logo is noticed.

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Practical advice on legal issues

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