// Legal
“ The first leg is, does the term cause a significant imbalance in the party’ s rights and obligations under the contract? If you can show that, then that’ s one leg of the test that’ s met,” Browne explained.
“ The second leg of the test is to ask whether that term is reasonably necessary to protect the legitimate interests of the party seeking to rely on it. If it’ s not reasonably necessary, then the second leg of the test is met. And thirdly, would it cause detriment, whether financial detriment or some other detriment to the party, if that term was to be relied on?”
If those three conditions are met, the term will then be unfair and likely found to be void, which does not necessarily mean that the contract has to be voided. The term can simply be severed from agreement, provided the contract can continue to operate effectively between the parties.
“ If it goes to the heart of the contract, then it might end up with the whole contract being made void,” Browne said.
Next steps
This new legislation should not come as a surprise to waste operators, particularly as the consultation process began some two years ago.
However, there is no requirement to publish notices that contracts are now subject to this legislation so it is up the business to consider whether or not their contracts contain terms that are unfair and if they do, they would need to also consider how to bring the contract back into balance without putting their business at commercial risk.
Browne highlighted that the waste sector had a number of smaller businesses that sub-contracted their services to the major players and it was worth looking at areas such as rollover and termination provisions.
“ Does this contract renew automatically without anyone having to do anything about it, and what does that mean? If it does renew, how long does it renew for? Is the business that you’ re servicing going to be bound for an extended period of time, more than what they might have thought they would be bound for? Those sorts of things could cause you some issues,” Browne highlighted, adding that pricing variation mechanisms were also worth a look over.
“ How do your price variation mechanisms work? Is there an ability, if you impose a price variation through
your contract, for the person that you’ re contracting with to say well, I’ m entitled to back out of this contract as a consequence? If you put your price up by 15 or 20 %, do they just have to take that price or can they say no, I’ m now giving you notice of termination and that’ s a 60-day notice? Unilateral variations of contracts are considered to be unfair because you’ re just imposing your will onto the other party without giving them an opportunity to negotiate that.”
Ed Browne.
The aim of the legislation is of course to protect small businesses from unfair contract terms, allowing them to object to a term they deem is unfair. There are however, a number of tests that need to be completed.
And for companies putting forward standard form contracts, Browne offered a piece of advice.
“ Maybe just reflect, if you were sitting on the other side of the fence, would you be happy to sign off on that provision or would you think that provision was unfair. Protect your interests by all means but just make sure that they remain reasonable and don’ t create this significant imbalance in the party’ s rights,” he said. iw
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Weekly news updates at www. BEN-global. com / waste AUGUST 2016 INSIDEWASTE 33