GrainCorp Operations Ltd (GrainCorp) has agreed to amend 19 terms in its Grain Warehousing Agreement with small business grain growers, after an ACCC investigation concluded that these terms were likely to be unfair contract terms under the Australian Consumer Law.
The ACCC was particularly concerned about a term which limited GrainCorp’s liability to growers to $100,000, even if the loss was caused by GrainCorp’s negligent acts or omissions. The value of the grain stored on behalf of growers can at times be substantially higher than $100,000, and the ACCC considered that it was unfair to limit liability to this amount if the loss was caused by Graincorp’s negligent acts or omissions.
“We believe the term which limited GrainCorp’s liability created a significant imbalance between the rights and obligations of growers and GrainCorp, and had the potential to cause significant financial detriment to growers without being reasonably necessary to protect GrainCorp’s legitimate interests,” ACCC Deputy Chair Mick Keogh said.
GrainCorp has committed to amending this term in the 2021/22 warehousing agreement, so that the limitation of liability does not apply for cases of gross negligence, fraud, criminal conduct or wilful misconduct by Graincorp. It will also increase liability for all other losses to $200,000.
“We welcome GrainCorp’s agreement to amend some of its contract terms, particularly the limitation of liability term, because the agreed amendment will remove the potential exposure of growers to losses arising from gross negligence and wilful misconduct by Graincorp,” Mr Keogh said.
During the course of the ACCC’s investigation, GrainCorp also changed some other terms in its current 2020/21 warehousing agreement to address a range of concerns raised by the ACCC, including:
- providing growers with sufficient time to make necessary arrangements should they not want to continue the arrangement into the new season, addressing concerns about GrainCorp having the unilateral right to renew or amend the terms of the agreement;
- removing limitations on GrainCorp’s obligations to perform certain services GrainCorp was contracted to provide under the Grain Warehousing Agreement;
- removing terms that allowed GrainCorp to deny reasonable requests by growers to inspect grain stored with GrainCorp, and inserting terms requiring GrainCorp to act in good faith; and
- removing terms that provided GrainCorp with a broad discretion to vary the goods or services it provided to growers.
“GrainCorp’s amendments provide better protections for growers and increase the rights of small growers when dealing with a large company,” Mr Keogh said.
GrainCorp has not admitted that any of the terms contained in its GWA are unfair contract terms, but have made these changes to address the ACCC’s concerns.
“The ACCC’s action should be a warning to businesses that they risk similar scrutiny if they include similar contract terms in their standard agreements with small businesses,” Mr Keogh said.
GrainCorp is a vertically integrated multinational grain handling company which receives grain and provides storage, markets and exports grain and provides port terminal services. It is the largest provider of grain storage on the East Coast of Australia.
GrainCorp operates grain port terminals in Geelong, Newcastle, Port Kembla, Brisbane, Gladstone, Mackay and Portland and offers grain rail transport services, through its arrangements with Pacific National and Aurizon, to move grain from its storage sites to its grain port terminals.
Under the Australian Consumer Law, it is not illegal for businesses to include or rely on an unfair contract terms against consumers. Although the Court can declare unfair terms to be void and consequently unenforceable, they cannot impose penalties on companies including these unfair terms in contracts.
A contract term is considered unfair under the Competition and Consumer Act if:
- the term causes a significant imbalance in the parties’ rights and obligations arising under the contract;
- the term is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
- the term would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
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