Repercussions of the new unfair contract terms provisions for the transport sector

New provisions enacted by the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 will commence on 12 November 2016. These will impact on industries that have traditionally relied on standard form, "one sided" exclusion and other clauses to limit their liability to customers and principal contractors. As a result, transport industry participants will need to review their terms before this date to identify whether any clauses are at risk of being "unfair terms" and therefore unenforceable, or consider having different standard form contracts for small business and other business customers.

In considering whether a term is unfair, courts will take into account the transparency of the term and the contract as a whole. While certain terms are excluded, such as those which define the main subject matter of the contract, set the upfront price payable under the contract, and are otherwise required or permitted by law, in most cases a clause which excludes liability in all circumstances will likely be regarded as "unfair".

Small businesses that consider a particular term to be unfair will be able to commence court proceedings and seek a declaration or other relief. If a court determines that a term is unfair, the contract will be void and unenforceable unless it can operate without the unfair term.

For carriers, the industry has long stated in its terms and conditions that they are "not common carriers" and that they accept no liability as such. Frequently, principal carriers use sub-contractors who will themselves expect limitation or exclusion of liability. However, there are many examples in current transport sector contracts which may be considered "unfair terms" vis-à-vis small businesses.

While certain types of shipping contracts are specifically excluded from the current "unfair terms" provisions under section 28 of the Australian Consumer Law, a contract for the carriage of goods by ship may have a cross over and be affected by the extension of the "unfair terms" provisions to small businesses.

In regard to a contract for the carriage of goods by ship, a bill of lading that comprises only a shipping component would appear to be specifically excluded. Those that include inland components may be subject to the new provisions.

Air carriers and freight forwarders who issue air waybills will also need to take the new provisions into account, but this will not apply to provisions otherwise permitted, such as waybills that incorporate the package, time-bar and other limitation provisions of the Civil Aviation (Carriers' Liability) Act 1959.

The provisions will not apply to terms regulated by the Insurance Contracts Act1984 (ICA). However, the position may be different in relation to some provisions in marine insurance contracts, which are governed by the Marine Insurance Act 1909 (MIA) and specifically excluded from the ICA. "Unfair terms" provisions would not apply to standard form marine insurance contracts that incorporate limitations which are permitted by the MIA.

Transport sector participants should therefore consider updating or amending their contracts, ensuring that clear language is adopted and unfair terms are removed or modified. Standard terms should be amended to include limitation provisions if applicable. Finally, ensure that all customers are aware of contract terms and conditions, particularly those heavily weighted in the service provider's favour.

 Written by Andrew Probert