Servcorp contract terms declared unfair by Federal Court

Servcorp contract terms declared unfair by Federal Court

The Federal Court has this morning declared by consent that 12 terms in contracts used by Servcorp (ASX: SRV) subsidiaries are unfair and therefore void.

The terms declared unfair included those that had the effect of automatically renewing a customer's contract and allowing Servcorp to increase the contract price; permitting Servcorp to unilaterally terminate contracts; unreasonably limiting Servcorp's liability; and permitting Servcorp to keep a customer's security deposit if a customer failed to request its return.

ACCC deputy chair Mick Keogh says the contracts contained unfair terms after the consumer law was extended to cover business-t-business contracts in 2016.

"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," says Keogh.

"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."

Following the Supreme Court's declaration, Servcorp, one of the largest suppliers of serviced office space to small businesses in Australia, will pay the ACCC's costs and establish an unfair contract terms compliance program.

In a release to the ASX, Servcorp emphasised how all three contracts in question were entered into before the new unfair contract terms regime first applied to small businesses.

Servcorp, in December 2017, issued new serviced office agreements to all current small business clients in Australia following a detailed internal review of the contractual terms used by its subsidiaries.

The listed company says that the ACCC does not intend to challenge any of the terms in the new serviced office agreements.

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