A Guide To Customer Contracts

Contents

Customer contracts are something that most businesses will engage with regularly. Businesses will usually have contracts with suppliers, partners and employees. This is to ensure that the details of their arrangement are in writing, and can be enforced if needed.

In the same way, businesses commonly have contracts to set out the relationship they have with their customers.

Having customer contracts in place is a great way to make sure all parties are aware of their duties and obligations, and it can be really beneficial when it comes to protecting your businesses.

However, it’s your responsibility as a business owner to make sure these contracts are fair, reasonable and abide by the relevant regulations. Read on to learn more.

What Is A Customer Contract?

Customer contracts are the legally binding agreements sellers have with their consumers. When a consumer is purchasing an item or service from a business, the exchange is seen as a legally binding contract. As a result, the interaction between a business and their customers must fulfil their obligations under the Australian Consumer Law (ACL).

The ACL covers a range of matters that arise in the engagement between sellers and buyers, such as misleading and deceptive conduct – we’ll cover this in more detail later.

What Is A Service Agreement?

A Service Agreement is a contract between a business and their customers that are using the service. Service agreements can take many forms – it can be a traditional paper contract or a button that is pressed online.

Either way, a Service Agreement usually covers matters regarding:

Payment
Scope of the services
Terms of the contract
Intellectual property
Customer obligations
Warranties
Liabilities
Termination
Force majeure

Service Agreements are highly important when running a business – it’s necessary for all parties to know their respective duties and obligations in order to carry them out. Furthermore, it protects your business if a disagreement should arise.

They’re quite similar to customer contracts, however, Service Agreements are more specific to the service being provided, whereas customer contracts are more general.

Why Do I Need A Customer Contract?

As we noted above, a customer contract clearly sets out what is expected of all parties and, should a misunderstanding arise, the contract is always there for reference.

Example
Thea runs a tailoring business, where she makes custom dresses. When a customer places an order, Thea attaches a Service Agreement for them to look over and sign. The agreement clearly states that in order for Thea to begin working on the order, the deposit must be paid within three days of making the request for a dress. The consequence of not paying the deposit on time is the finishing date for the final product being delayed.

The Service Agreement here essentially outlines Thea’s tailoring service, and the conditions under which consumers can enjoy this service.

Customer Contract Regulations

Customer contract regulations have been set out by the Australian Competition and Consumer Commission (ACCC) as a way to protect customers. The reasoning is that contracts between businesses and consumers can often put consumers at risk considering they have less bargaining power.

As businesses tend to set the terms of their contracts with little to zero negotiation space for consumers, there are regulations in place to create a fair standard that all businesses must abide by. This places the consumer in a better and less vulnerable position.

Australian Consumer Law Obligations

The Australian Consumer Law (ACL) is the key regulation all businesses need to follow to ensure they are treating their customers in accordance with the law. The ACL covers a variety of important matters – we’ve listed some key ones below.

What Are Unfair Contract Terms?

Unfair contract terms place one party at a disadvantage over another. In other words, they are contractual terms that are considered unreasonable in how it negatively affects a party.

Businesses that create customer contracts need to be aware of these key factors to avoid having contracts that contain unfair terms. Unfair terms mean that:

The terms of the contract are not reasonably necessary to achieve the business’ objectives
The contract creates an imbalance between your consumers and the business
The term is not transparent or it is very ambiguous
If the term were to be enforced, it would be detrimental to the consumer

If you are unsure, it’s best to contact a legal professional to review your contracts for you to be on the safe side.

What Else Does The Australian Consumer Law Say?

The ACL covers a few other things in order to better protect consumers from businesses that may not be taking their best interests into account.

Generally speaking, though, the ACL protects consumers who rely on a business’ information or any unfair advertising practices to make a purchase.

Misleading And Deceptive Conduct

Misleading and deceptive conduct encompasses statements and behaviour that lead consumers to believe an untrue statement about a product or service, resulting in them purchasing the product with the wrong information.

The ACL is extremely clear that any form of misleading or deceptive conduct is not acceptable and a punishable offence. It even applies to conduct that is merely likely to deceive a consumer.

In order to avoid being accused of misleading and deceptive conduct, take steps to ensure that your business’ website, employees and yourself are completely transparent with customers. For example, have all the relevant disclaimers on your website.

Invitation To Treat Vs Offer

Invitation to treat and offers are usually important parts of businesses promotions and transactions. An invitation to treat gives another party the option to make an offer.

For example, setting a date for an auction would be considered an invitation to treat. An offer, on the other hand, is a proposition in which the party being made the offer has the option to accept or reject it.

An offer becomes legally binding once it has been accepted. However, an invitation to treat is not legally binding. Despite the fact that it is not legally binding, the ACL still requires businesses to conduct fair practice methods when engaging in an invitation to treat.

Key Takeaways

If you’re a business engaging with customers, then you are going to be in a contract with your customers at some point which can take various forms. Due to this, it’s important to know what your duties and obligations are to make sure your business is not in breach of any laws.

To summarise what we’ve discussed:

Customer contracts are the legally binding agreements businesses have with their customers
A Service Agreement is a contract between the consumer and the business, outlining important matters such as scope of service, payment, liabilities and warranties
Customer contracts are a valuable way to protect your business in case of a dispute
Customer contract regulations means that consumer contracts need to be in line with the ACL
The ACL prohibits misleading and deceptive conduct as well as requiring fair advertising practices

If you would like a consultation on customer contracts, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Sapna Goundan

Sapna has completed a Bachelor of Arts/Laws. Since graduating, she's worked primarily in the field of legal research and writing, and she now writes for Sprintlaw.

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