A Sydney home builder has been criticised for an “unfair” contract clause that threatened legal action if customers publicly complained.
This week, Australian Competition and Consumer Commission deputy chair Mick Keogh said residential home builder Fowler Homes had agreed to quit gagging customers from publishing negative feedback.
The clause also required customers to compensate Fowler Homes against any losses suffered from enforcing those terms.
In a legal undertaking to the competition watchdog, the family-owned builder pledged to write to clients of about 434 contracts entered into since July 2019 to inform them that the clause would not be enforced.
The Sydney builder had a non-disparagement clause in its standard contract that prohibited sharing any feedback without prior permission.
The ACCC said this caused a “significant imbalance” in the parties’ rights and obligations.
Agreeing to remove the clause from future contracts, Fowler managing director Frank Gruippaudo said the company had undertaken a formal contract review and amended the clause so it did not “restrict clients’ rights to openly discuss services”.
Mr Keough said the company should have known better after the watchdog took action against other builders for similar contract clauses.
“We are disappointed Fowler Homes continued to use unfair non-disparagement clauses … when the ACCC’s actions against other building companies for similar clauses should have been well known and understood within the industry,” he said.
He warned businesses they had less than a year to review their contracts before new legislation that included penalties for unfair terms comes into effect.
“From 10 November 2023, businesses may face penalties if they use unfair contract terms in certain standard form contracts,” he said.
The Competition and Consumer Act was amended in October to include penalties for unfair contract terms.
Previously, Australian courts could void unfair parts of contracts; however, there was no legal provisions to penalise companies.
“The unfair contract terms laws are vital to protect consumers and small businesses against terms in these contracts that take advantage of this imbalance in bargaining power,” ACCC chair Gina Cass-Gottlieb said when the legislation passed.
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