How will the new unfair contract terms regime affect victorian councils_ – lexology

On 12 November 2016, the Australian Consumer Law ( ACL)’s unfair contract terms regime began applying to ‘small business contracts’. Tendering and procurement This change has the potential to impact local government as it gives ‘small businesses’ the ability to seek a declaration from a court that certain terms in some standard form contracts are void for being ‘unfair’.

We have received a number of enquiries from our Council clients as to how the changes will affect Council contracts and whether any action needs to be taken to avoid contravening the new provisions. Competitive tendering This article gives an overview of how the new laws apply at the local government level and what to do in circumstances where they do apply.

• is entered into on or after 12 November 2016, or is an existing contract that is renewed or amended on or after that date (for example, where an option to extend the term of a contract is exercised after 12 November 2016)

Where a contract satisfies the above criteria, the contractor/ supplier/ consultant (or the relevant consumer protection agency such as the Australian Competition and Consumer Commission or Consumer Affairs Victoria ( ACL Regulator)) can apply to the court for a declaration that a term of the contract is ‘unfair’. E tendering system of government of west bengal If they are successful, the relevant term in the contract will be void.

Neither ‘standard form contract’ nor ‘unfair’ is defined in the ACL. E tendering system Rather, the ACL provides lists of criteria and examples that courts are to take into account when considering whether a contract is ‘standard form’ or a term is ‘unfair’.

Councils typically use precedent or standard form contracts when seeking quotations or tenders for the supply of goods or services. Process of tendering Where the successful contractor or consultant is a ‘small business’, it is possible that the above criteria will be satisfied if Council does not take appropriate mitigation measures.

In determining whether a term of a small business contract is unfair, a court may take into account the extent to which the term in question is transparent, and the contract as a whole.

The types of contract terms that may be considered unfair in the context of small business contracts include (just to name a few) terms that:

• permit, or have the effect of permitting, Council to terminate the contract (eg. Tendering for government business a termination for convenience clause that is only exercisable by Council)

• permit, or have the effect of permitting, Council to unilaterally vary the characteristics of the goods or services to be supplied (eg. E tendering system government of kerala a variation clause)

• permit Council to unilaterally determine whether the contract has been breached or to interpret its meaning (eg. E tendering process in west bengal consider terms that contain the words ‘in Council’s opinion’)

• limit, or have the effect of limiting, one party’s right to sue another party (eg. Procurement and tendering a clause that prohibits a contractor from making a claim against Council where it has failed to meet specified time or notice requirements).

A court can declare a term of a small business contract to be unfair. Tendering process pdf If this occurs, the term will be void but the rest of the contract will remain on foot (if it can survive without the unfair term). Procurement and tendering in construction Both small businesses and the ACL Regulator can apply to a court to have a term declared unfair.

Even where a contract is a ‘standard form contract’ entered into with a ‘small business’, there are situations where the UCT will not apply. What is e tendering For example, the UCT will not apply to terms to the extent that they:

• set the upfront price payable under the contract (including any future payments referrable to the supply, grant or sale so long as they are disclosed at or before the time the contract is entered into)

The recent changes to the ACL are significant and it is important that Councils understand how they apply to its activities. Tendering meaning As part of this process, Council should consider any precedent contracts used to engage small businesses for the supply of goods or services (or a sale or grant of an interest in land) to see whether they contain terms that are likely to infringe the UCT.

Given that these changes are very recent and given the uncertainty as to how the courts will interpret the concept of ‘unfair’, it is premature for Councils to stop using their current contracts due to fear that the UCT will threaten their provisions.

Rather, Council should consider what mitigation measures they may be able to adopt to minimise the risk of contractual terms being challenged. Meaning of tendering These measures could include:

• issuing conditions of contract with any request for quotation or invitation to tender and inviting respondents to submit proposed departures to the conditions

• avoiding a ‘take it or leave it’ approach in engaging small businesses under these contracts and being open to negotiation with its small business contractors

• keeping records as to why particular conditions of contract are necessary for the protection of Council’s legitimate interests (eg. Tendering process in public procurement why Council requires the ability to terminate a contract for its convenience)

• considering whether it can, where appropriate, enter into umbrella agreements with suppliers rather than a series of small contracts (eg. Tendering process in construction industry rather than engaging a contractor to conduct maintenance to Council buildings using individual contracts for each location, consider using a single maintenance agreement that covers all locations and buildings).

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