On 6 June 2018, the Australian Competition and Consumer Commission (ACCC) announced that it had accepted a court enforceable undertaking (undertaking) from home builder Wisdom Properties Group Pty Ltd (Wisdom) in connection with the non-disparagement clauses included in its standard form home building agreement (Agreement).
The non-disparagement clauses had been in Wisdom’s Agreement since at least October 2008 and allowed Wisdom to control public statements made by customers about the Agreement or the services provided by Wisdom. The Agreement also allowed Wisdom to suspend the customer’s building works if the customer breached the non-disparagement clauses and contained broad indemnities in favour of Wisdom in relation to losses arising out of public statements made by customers.
Wisdom has, among other things, undertaken to the ACCC:
- Not to enforce or rely on the non-disparagement clauses;
- To publish a corrective notice on its website confirming customer’s home building agreements had been amended;
- To send a corrective letter to customers that entered into the agreement between 1 January 2015 and the date of the undertaking; and
- To enter into an Australian Consumer Law compliance program and maintain such compliance program for three years from the date of the undertaking.
This marks the second undertaking the ACCC has accepted under the unfair contract terms regime, in relation to non-disparagement clauses in a home building contract, the first being an undertaking given by 101 Residential Pty Ltd (101 Residential) on 15 December 2017.
The unfair contract terms regime is set out in the Australian Consumer Law (and in the Australian Securities and Investments Commission Act 2001 with respect to contracts for financial products and services). The effect under the regime is that a Court or relevant Tribunal can declare terms in standard form consumer contracts or small business contracts to be unfair and therefore unenforceable. A party to an eligible contract, the ACCC or the Australian Securities and Investments Commission has standing to seek a declaration that a term is unfair.
At the time that the undertaking was given by 101 Residential, the ACCC stated “Online reviews help people make informed purchasing decisions. Consumers should be free to have their say about their experience with a business and must not face penalties for doing so”. In connection with the undertaking given by Wisdom, the ACCC stated “Any standard form contract terms that prevent or limit a customer from making public comments about goods or services are likely to be unfair under the Australian Consumer Law.”
While the undertakings accepted by the ACCC have both related to the home building industry, it would be prudent for all businesses with standard form contracts containing non-disparagement clauses to review these clauses.
This article was written by Teresa Torcasio, Partner and Marian Ngo, Senior Associate in our Melbourne office.
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