Servcorp’s business contract terms declared unfair

13 July 2018

The Federal Court has declared by consent that 12 terms in standard form contracts used by two Servcorp Ltd subsidiaries (Servcorp Parramatta Pty Ltd and Servcorp Melbourne 18 Pty Ltd) (together Servcorp) are unfair and therefore void.

The terms declared unfair include those that had the effect of:

  • automatically renewing a customer’s contract, unless the customer had opted out, and allowing Servcorp to then unilaterally increase the contract price;
  • permitting Servcorp to unilaterally terminate contracts;
  • unreasonably limiting Servcorp’s liability or imposing unreasonable liability on the customer; and
  • permitting Servcorp to keep a customer’s security deposit if a customer failed to request its return.

“Servcorp’s contracts contained unfair terms after the Australian Consumer Law was extended to cover business-to-business contracts in 2016,” ACCC Deputy Chair Mick Keogh said.

“Businesses can no longer impose contract terms that create a significant power imbalance between parties, are not necessary to protect their legitimate interests, and which would cause significant financial detriment to a small business.”

“While penalties do not apply for unfair contract terms, the ACCC will continue to take matters to court to ensure these terms are declared void and protect businesses,” Mr Keogh said.

As part of this outcome, Servcorp has established an unfair contract terms compliance program for its Australian business, and will pay the ACCC’s costs.

Background:

Servcorp Ltd is one of the largest suppliers of serviced office space to small businesses in Australia. The ACCC instituted proceedings in September 2017.

Under the Australian Consumer Law (ACL), a court can determine that a term of a standard form contract is unfair and therefore void, meaning that the contract is treated as if the term never existed. If the term is declared void, the remainder of the contract continues to bind the parties to the extent that it can operate without the unfair term. Further information is here.

Release number: 
127/18
ACCC Infocentre: 

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