Victoria’s small business commissioner has urged SMEs to contact her office if they are concerned about contracts they’ve signed, saying the first ruling from the Victorian Civil and Administrative Tribunal to enforce unfair contract rules shows the fight to stamp out unjust agreements is gaining momentum.
On Wednesday, VCAT ordered Success Resources Australia Pty Ltd, a business that facilitates the booking of motivational speakers like Tony Robbins, to repay $3995 to a business client after it postponed a seminar that had been booked in November 2016.
The client worked in a Victorian real estate agency and booked a seminar through Success Resources that was due to be run in Melbourne in January 2017 by an expert from the UK.
However, the customer was later informed the provider had to “postpone the Melbourne event to a later date to be confirmed in 2017” and he was instead offered the same course in Sydney and a $500 goodwill rebate.
The client refused this alternative and the business declined to give a refund, saying he had agreed to the terms and conditions of the purchase.
However, VCAT deputy president Ian Lulham found the terms and conditions were a breach of fair contract terms, and therefore the contract was void.
In particular, deputy president Lulham took issue with clause three of the contract, which stated Success Resources “may change the Speakers, the Hours, the Dates and/or the Location of the Seminar Services for any reason by notifying you in writing of the change and detailing substitute Speakers, Seminar Hours, Dates and/or Location”.
He said the clause exhibited “pure drafting overreach” and observed “any number of comedic examples would come to mind were clause 3 to have any effect”.
Lulham said while this clause would be “unenforceable under common law”, he was able to make a decision based on Australian Consumer Law and new unfair contract rules for small businesses, which came into effect in November 2016.
His ruling was based on the definition that contract terms are void for small business contracts if they “cause a significant imbalance in the parties’ rights and obligations; it is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and it would cause significant detriment to a party”.
The business was ordered to repay the $3,995 fee the applicant had paid for the course.
SmartCompany is awaiting comment from Success Resources about the matter. SmartCompany was unable to contact the client prior to publication.
“Small businesses can be ready to sign anything”
Victorian Small Business Commissioner Judy O’Connell believes the decision is heartening for small businesses seeking to enforce their rights in Victoria, and says her office is gearing up to resolve more disputes in this area.
“Other small businesses now know even if they came to us for mediation [instead of going straight to VCAT], we have the case behind us to say this is not on. What I hope is that when small businesses get contracts like this, they can say, ‘this is not on’,” says O’Connell.
Get SmartCompany FREE to your inbox every weekday.
The Victorian Small Business Commissioner hears hundreds of voluntary mediation cases from small businesses each year, aiming to resolve issues before they have to hit the courts system. O’Connell says while the office is yet seen cases specifically related to the new unfair contract terms laws, contractual disputes account for more than a third of the cases they hear each year.
“We also had 265 cases essentially around unpaid money, and often these cases are people saying, ‘I’m not paying’, and around contractual obligations,” she says.
Countless small businesses sign up to unfair contracts each year either because they don’t have time to understand the fine print, or they don’t have a choice, O’Connell says.
“They don’t understand it, so they might be actually signing something and don’t understand the fine print, or they sign it because they have to, because they need the business,” she says.
While it will be some time before a larger body of unfair contract cases have been tested, O’Connell urges Victorian businesses to contact her office if they’re looking at a clause that doesn’t seem right.
“If they’ve got a dispute, they can call us — or even if they want to give us a call to make sure they’ve got it all right [with a contract],” she says.