Selected cases

Federal Court of Australia · [2018] FCA 1044

ACCC v Servcorp

A Federal Court unfair contract terms case about serviced-office contracts used with small business customers.

Federal Court of Australia13 July 2018

Plain-English explainers, not legal advice. Use the linked official source for section-level detail, and get advice for your situation.

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Quick read

  • Small-business standard form contracts should not give the supplier one-sided control over renewal, price increases, termination, liability or security deposits.
  • A Federal Court unfair contract terms case about serviced-office contracts used with small business customers.

Use this to check

  • Business-to-business standard terms can be caught by unfair contract term laws.
  • Automatic renewal and unilateral price increases need careful limits.
  • Deposits, indemnities and liability caps should not be drafted as one-way weapons.

Decision snapshot

  1. What happened

    • Servcorp supplied serviced offices and virtual office services to small business customers through standard form contracts.
    • The ACCC challenged terms used by Servcorp subsidiaries, including automatic renewal, unilateral price increases, unilateral termination, broad limitations of liability, customer liability provisions and retention of security deposits.

  2. What the court had to decide

    • The Court was asked to declare whether a group of Servcorp standard form contract terms were unfair under the Australian Consumer Law because they created a significant imbalance, were not reasonably necessary to protect legitimate interests and could cause detriment.

  3. What the court decided

    • The Federal Court declared 12 standard form contract terms unfair and void by consent.
    • Servcorp also established a compliance program and paid costs, making the case a useful companion to JJ Richards for small-business contract templates.

Practical impact

Practical read

  • Small-business standard form contracts should not give the supplier one-sided control over renewal, price increases, termination, liability or security deposits.
  • Serviced-office and subscription-style contracts are especially exposed.

Useful next steps

  • Business-to-business standard terms can be caught by unfair contract term laws.
  • Automatic renewal and unilateral price increases need careful limits.
  • Deposits, indemnities and liability caps should not be drafted as one-way weapons.
  • Review renewal and price variation clauses for notice and opt-out rights.
  • Check termination and suspension rights are balanced and commercially justified.

Practical read

Servcorp is a practical unfair-contract-terms case for any business selling services on standard terms. The contract was not a consumer checkout page. It was a business-to-business services arrangement, exactly the kind of template many suppliers reuse for office services, SaaS, facilities, memberships and support packages.

The lesson is that operational convenience is not enough. If a clause lets one side renew, vary, terminate, charge, keep deposits or avoid liability without a fair balancing mechanism, it belongs on the review list.

Checks to run

Key points

  • Review renewal and price variation clauses for notice and opt-out rights.
  • Check termination and suspension rights are balanced and commercially justified.
  • Avoid broad customer indemnities that go beyond the customer's fault or control.
  • Update templates for the current unfair contract terms penalty regime.

Key takeaways

  • Business-to-business standard terms can be caught by unfair contract term laws.
  • Automatic renewal and unilateral price increases need careful limits.
  • Deposits, indemnities and liability caps should not be drafted as one-way weapons.

Related topics

Contracts & CommercialConsumer Law & Trading

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