CN07 - Fujifilms contract terms declared unfair by Australian Federal Court
03 October 2022
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03 October 2022
The Federal Court has declared as unfair nearly 300 contract terms used by Fujifilm Business Innovation Australia and/or Fujifilm Leasing Australia ("Fujifilm") in 21 standard form contracts entered with thousands of small businesses. Fujifilm will no longer be able to rely on those existing terms, nor use them in future.
Key takeaways
- The Australian Consumer Law empowers the Federal Court to declare as unfair, contract terms used in certain consumer and small business standard form contracts, in order to prevent businesses from relying on them and continuing to enforce them.
- Fujifilm entered into or renewed 34,000 contracts containing nearly 300 terms which were declared unfair by the Federal Court. The Court also ordered injunctions, corrective notices and communication orders and the implementation of a compliance programme.
- Compliance with these orders is likely to involve a significant practical burden on Fujifilm – it must contact all of the contracted customers to determine which of the still current contracts from the 34,000 it entered are standard form contracts with small businesses to which the unfair contract terms regime applies.
- A Bill is expected to be introduced into Parliament proposing amendments to the unfair contract terms regime to, among other things, introduce new prohibitions which would make the use of unfair contract terms illegal and attract significant penalties for contravention.
The Australian Consumer Law protects consumers and small businesses against unfair terms in standard form contracts for goods or services, where the value of the contract is no more than AUD 300,000 (or AUD 1 million for contracts longer than 12 months). A small business is a business employing fewer than 20 persons at the time of entering the standard form contract.
A contract term is considered unfair if:
A court has the power to declare a term unfair, which renders the term void and unenforceable. The contract continues to bind the parties to the extent possible without the unfair term.
Between November 2016 and December 2021, Fujifilm used 21 standard form contract templates to contract with customers for the supply of printers and related software on a lease basis. 34,000 contracts were entered into or renewed using these standard form contract templates, of which the ACCC believe a substantial proportion would have been with small businesses.
The ACCC alleged that the following types of terms in Fujifilm's contracts were unfair (in sum, the instances of these terms across the 21 templates totalled nearly 300):
Fujifilm admitted that these types of terms in its standard form contract templates were unfair and consented to the following declarations and orders being made by the Federal Court:
Under the current regime, the use of unfair contract terms attracts various remedies but does not attract pecuniary penalties.
The Government has announced the introduction of a new Bill to Parliament between September and December 2022, amending the unfair contract terms regime. Although the detail in the Bill is yet to be announced, it is expected that these amendments will be substantially the same as or similar to the Bill introduced into Parliament in February 2022, which lapsed due to the change in Government in May 2022. Most notably, the proposed changes would introduce new prohibitions against the use of unfair contract terms – making them illegal and attracting significant penalties if contravened (see our March 2022 newsletter).
Businesses should continue to follow the passage of the proposed reforms through Parliament and prioritise reviewing their standard form contracts with consumers and small businesses for possible unfair contract terms.
With thanks to Matthew Harper and Alicia Gormly of Ashurst for their contributions.
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.
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