Perth based building company, 101 Residential Pty Ltd, has amended its standard home building contract following ACCC concerns that it contained unfair terms and made false or misleading representations.
Between October 2014 and August 2017, 101 Residential’s building contract contained non-disparagement clauses that allowed it to prohibit customers from publishing any unapproved information about the company, including online reviews.
The non-disparagement clauses also allowed 101 Residential to remove any published information, suspend work on the customer’s construction site and ultimately terminate a customer’s building contract.
“Online reviews help people make informed purchasing decisions. Consumers should be free to have their say about their experience with a business and must not face penalties for doing so,” ACCC Deputy Chair Dr Michael Schaper said.
101 Residential has accepted that the non-disparagement clauses may be unfair and has cooperated in providing the ACCC with a court enforceable undertaking.
The undertaking provides that 101 Residential will not enforce non-disparagement clauses in existing building contracts and will not use them in any future contracts. 101 Residential will also refund customers who lost their deposits because they decided not to proceed with 101 Residential due to the non-disparagement clauses.
“This should serve as a warning to all businesses that they should review their standard form contracts to ensure they do not contain unfair terms,” Dr Schaper said.
101 Residential also accepted that there were two statements in its standard home building contract that were likely to amount to false or misleading representations:
- a term that unreasonably limited 101 Residential’s liability and was inconsistent with the statutory guarantees automatically provided to consumers under the Australian Consumer Law (ACL), and
- a statement that an annexure to its building contract was based on a Housing Industry Association (HIA) standard building form, when this was not the case.
Under the court enforceable undertaking provided to the ACCC, 101 Residential will also publish a corrective notice and write to affected consumers; and establish an ACL Compliance Program.
Background
101 Residential is part of the Scott Park Group of home builders in WA.
The unfair contract term provisions under the ACL came into effect on 1 July 2010. The ACL provides that a term of a consumer contract is considered unfair if:
- it would cause a significant imbalance in the parties’ rights and obligations arising under the contract
- it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term
- it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.