AS farmers scramble to obtain late winter fertiliser for their crops, the Australian Consumer and Competition Commission (ACCC) has announced amendments will be made to the standard form fertiliser contracts, to come into effect on November 10.

As it stands, farmers are given very little security in their contracts.

Whilst the farmer is bound to the terms, whether the supplier actually supplies, any product and at what price that product is delivered for, remains open in the contract.

For example, if the price of the fertiliser drops between entering the contract and delivery, the farmer must pay the higher contracted price or be in breach of contract. If the price increases, the supplier can simply not supply anything at the lower price or insist on receiving the higher price. 

Hence, the ACCC launched an investigation into whether the contract terms were unfair. 

“We initiated an investigation after receiving complaints that fertiliser suppliers were using contracts in a way that could disadvantage farmers,” ACCC deputy chair Mick Keogh said.

The ACCC obtained copies of standard form fertiliser supply agreements and identified potentially unfair contract terms in those agreements.

A term in a standard form contract may be unfair where it creates a significant imbalance in the parties’ rights and obligations under the contract, is not reasonably necessary to protect a party’s legitimate business interests or is likely to cause financial or other harm to the other party if enforced.

Some of the potentially unfair terms identified by the ACCC included terms giving the supplier the right to unilaterally vary the quantity to be delivered to the buyer or to terminate the agreement if the supplier believed it would not be able to supply the goods. Some terms restricted buyers’ rights to raise issues about defects with the goods.

All the fertiliser suppliers that the ACCC engaged with during its investigation co-operated and changed the contract terms to address the ACCC’s concerns. 

Under the new unfair contract term laws that come into effect on November 10, 2023, the ACCC will be able to take court action to seek pecuniary penalties for breaches of the unfair contract term law.

The maximum penalty will be the greater of $50 million or three times the value of the benefit derived or, if that value cannot be determined, 30 per cent of the company’s turnover during the period it engaged in the conduct.

“This is an important reminder to all businesses in the agricultural sector of the need to review their standard form small business contracts and remove unfair contract terms now, or they risk significant penalties when the new laws take effect,” Mr Keogh said.

The new unfair contract terms’ provisions will also expand the definition of a ‘small business’ to include businesses with up to 100 employees or up to $10 million in annual turnover.

“We will continue to monitor traders in the fertiliser industry and, more broadly, across the agricultural sector, and we will investigate if we have concerns with contract terms,” Mr Keogh said.

“If a small business thinks an unfair contract term is being included or enforced in their agreement, we recommend they obtain independent legal advice to understand the options available to them.”