Indemnities, Telstra contracts and the Unfair Contract Terms Act - what work does the clause do (or tell me that I'm dreaming)
Some time ago I posted about the lurking dangers of indemnities in novated leases and the unintended consequences for employers who (normally HR / P&C people) blindly signing these to keep some employee happy in a tax effective salary sacrifice arrangement. - see https://www.dhirubhai.net/pulse/novated-leases-sting-tail-employers-uninsured-risks-mark-grodzicky-360pc
I recently had the dubious pleasure of translating Telstra Customer terms and conditions, which are not easy to follow / work out which ones apply.
Now Telstra is a really big company but has been on the receiving end of a lot of love from ACCC for allegedly somewhat one sided contracts and business practices, so one can only own assume it might have some filing system (or post it notes) that helps remember some of the lessons learnt.
Alas not it seems.
Exhibit 1 : Check out https://www.telstra.com.au/customer-terms/business-government
On this page they have this statement
Corporate
If you are a corporate customer these General Terms apply to you.
For any service, you are a corporate customer if you are a business who acquired your service primarily for business purposes, and either had the chance to negotiate the terms of your contract with us, or have an annual spend with us of more than $40,000.
Now reading this statement a few things stand out to me
It gets better.
For a bit of fun, I looked at the General Terms for Small Business Customers and found I actually liked them a lot more that the Corporate Customer Terms, so it dawned on me that as a loyal Corporate Customer, I was already on the backfoot re negotiations with one hand tied behind my back (or based on some recent telco network outages, up the creek without a paddle as the coffee shop / super market/ petrol station only took credit card payments and the network was out for lunch (and dinner))
The main offending clauses (for me at least) from the Corporate Customer terms are the liability ones, namely 6. Our Liability to you and 7. Your Liability to us
Now Clause 6.4 is interesting in that it seems to exclude liability for things like breach of privacy laws, breach of confidentiality and loss of data (noting the services are cloud based managed services so well within the control of Telstra to manage the liability risk sharing). I can only assume they used AI legal bots trained in some country that does not have any consumer protections laws to draft these terms.
As if the above was not enough salt in my injury, Telstra then added some interesting indemnities (by the customer) in clauses 7.2 and 7.3, which I have extracted below, mainly because even I could not understand exactly what they mean, or maybe do understand and simply can not believe they would do this and think they can get way with it. (Sorry if you, like most people, signed the terms without reading them before you read this post because you trusted Telstra to do the right thing )
7.2 You indemnify us against (and must pay us for) any loss or damage we suffer, relating to:
(a) the use (or attempted use) of your service;
(b) equipment used in connection with your service.
7.3 You indemnify us against (and must pay us for) any costs (including legal costs) relating to your breach of Our Customer Terms.
Now my reading of Clause 7.2 above, following the maxum of "what work does the clause do", suggests that even my using the service (or attempting to use the service), makes me liable to indemnify Telstra, but not sure for what. No "except for actions, omission, breaches or faults caused by Telstra", no causation or mitigation or even remoteness principles. Seems it would cover Telstra suffering a loss of not being able to sell more of the services to someone else because I was using it like a greedy git.
I have no idea what 7.2 (b) implies, given its supposed to be a cloud managed services, but I'm sure computers have (or will soon have) emotions and feelings and so if I (or say a hacker) hurt it somehow, Telstra can claim under this indemnity.
Clause 7.3 is a beauty in my view. Not only might I be liable under the contract for breach (not sure what for exactly as a customer unless I don't pay the invoice), but I voluntarily agree to indemnify Telstra, and waive any concept of reasonableness or duty to mitigate on Telstra's behalf.
Given the one sided nature of this "customer friendly" contract, no reciprocal equivalent offer is made by Telstra to indemnify me for my losses caused by their breaches or use (or attempted use) of the services (whatever what means) .
Now I know Telstra is having a hard time with falling revenues caused by customers churning and going to competitors, ACCC legal fights and a somewhat languishing stock price (I should know, I'm a shareholder), but surely using the gains under a agreement to prop up its earnings is going a step to far ? Albeit IBM was once accused of being a patent troll to generate revenues based on my past experience https://au.pcmag.com/business-1/42925/ibm-is-the-worlds-biggest-patent-troll
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There are no such clauses in the more consumer friendly General Terms for Small Business Customers (see clauses 8 Our liability to you and 9. Your liability to us). In fact, they seem pretty reasonable to me re given the exclusions and lack of any indemnity by the customer, albeit still fail to mention Telstra's liability for privacy, confidentiality or IP infringements.
Which brings me to the Unfair Contract Terms Act and changes to the ACL, which I know you lawyers out there will say would not apply to most companies, given you are out in the legal wild on your own if , after November 2023, you are unlucky to have over 100 employees or revenues of more than $10M, albeit a covered small business could probably afford only 1/10th of a lawyer.
As an aside, a report from the Australian Small Business and Family Enterprise Ombudsman (never knew this existed) says 99.8% of business (or 2,584,978 out of a total of 2,589,873 business in Australia) are small business with less than 199 employees and of those 98.3% have revenues of less than $10M.
So its tough luck if you happen to be in the remaining 1.2% of Australian businesses not covered by the Unfair Contract Terms Act. Sort of begs the question of why not just make it 100% coverage and be done with it, it being a rounding error in most financial statements anyway .
Of course the Privacy Act excludes any business with revenues under $3M, so based on the ASBFEO of businesses under $2M revenue, some 2,379,090 of them don't need to protect your PII. No wonder we will never be a adequate jurisdiction under the EU GDPR (although our NZ cousins across the ditch are )
In addition, the ASIC Act has, for financial products, increased its unfair contract term provisions in April 2021 to apply if the upfront contract price is less than $5M (up from $1M for contracts longer that 12 months and AUD$300K if less than 12 months ) but still need one of the parties to be a small business and have less than 100 employees or revenues under $10M per annum.
I would point out that prior to November 2023, the ACL provisions applied if you had less than 20 employees or the contract was less than $300,000, so I'm not sure why they picked the above new limits.
Under the old regime, seems you could still get coverage under the Unfair Contract terms for a contract for say $600K over 3 years, on the basis that its only $200,000 per year, regardless of number of employees. Step backwards in my view.
Rounding back to Telstra terms, I submit that these sort of indemnity clauses would probably (but for the big business coverage limits) be a breach of the Unfair Contract Terms Act, based on the ACL and ACCC guides https://consumer.gov.au/sites/consumer/files/2016/05/0553FT_ACL-guides_ContractTerms_web.pdf
In the ACL Guide, a term of a consumer contract is unfair if it:
? would cause a significant imbalance in the parties’ rights and obligations arising under the contract
? is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and
? would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
Now I think my examples above meets all three of the above.
So I leave you with the question - How this this get past the Telstra ? And does Telstra care anyway.
As a side note, I'm still waiting to for a "chance" to negotiate the terms with Telstra - maybe their lawyers are busy with some ACCC matters.
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Co-founder at Mondial Advisory. Decarbonisation, cleantech sector strategy & business development.
9 个月Thanks Mark. One takes one’s chances I guess.