Why and when we say no - When unfair is not fair enough
Updated: Oct 6, 2020
We work with clients and suppliers to agree terms and conditions as early as possible in the collaboration. We do this as it is the formal description of the relationship. Get it right early and business becomes easier over time. Get it wrong and business becomes harder over time.
One of the common reasons we say no is when we are presented with a "Standard Form Contract" and have little room to negotiate the terms.
A standard form contract is usually one that has been prepared by one party to the contract and where the other party has little or no opportunity to negotiate the terms – that is, it is offered on a ‘take it or leave it’ basis.
This is often the case when providing services to a much larger company. In every case, we quickly review the contract and pursue opportunities to negotiate terms with the client. We generally outline in plain English our concerns in an attempt to resolve issues quickly.
We do this to avoid future issues regarding unfair contract terms. If the larger company refuses to discuss, we are highly likely to say no. It is easier than waiting till after signature to then seek a decision from ACCC.
According to the ACCC, there is a presumption that a contract is a standard form contract, so the party that prepared the contract has to prove it isn’t (e.g. by demonstrating a real willingness to make requested changes to key terms).
In deciding whether a contract is a standard form contract for the purposes of these laws, a court or tribunal may take into account any matters it considers relevant, but it must take into account:
whether one of the parties has all or most of the bargaining power in the transaction
whether the contract was prepared by one party before any discussion occurred between the parties about the transaction
whether the other party was, in effect, required to either accept or reject the terms of the contract in the form in which they were presented
whether the other party was given any real opportunity to negotiate the terms of the contract
whether the terms of the contract take into account the specific characteristics of the other party or the particular transaction.
So on balance, the easiest way to get us to a point where we say no to a contract is to present us a standard form contract, containing unfair or potentially unfair terms, and provide very little room to negotiate.
Oh... we also shy away from exclusivity and onerous restrictive covenants, but we will leave that for another post.