To ensure HVACR contracts comply with new laws Clearscope Legal founder, Raphael Brown, outlines recent changes to business contracts.
Most HVACR businesses do not like paying for legal fees. Staying on top of the game in what is a very competitive industry is much more front of mind!
But at the same time business owners and managers do want their contracts to remain compliant, especially when faced with new and far-reaching legal changes.
In the past year sweeping legal changes came into effect requiring careful reviewing and updating of “standard contracts” – such as T&Cs, Terms of Supply and Terms of Service.
If you service “small businesses” (less than 20 employees) and use standard form contracts with contract values of less than $300,000 (or less than $1 million for contracts longer than 12 months), there is a very good chance that the new laws will apply to your business.
To ensure that your HVACR contracts comply with the new laws, some contract terms will need to be carefully re-worded, other terms may have to be removed completely, and new terms may be required.
Let’s take a quick look at a couple of terms commonly found in HVACR contracts and suggest some steps that could be taken.
This type of clause has become almost standard in HVACR contracts. The clause typically provides that a customer will be liable if they do something that causes loss to a supplier or service provider.
Under the new laws, indemnity clauses in their traditional format are at risk of being unenforceable.
To help avoid this, take the following steps:
Put a cap on the amount of the indemnity
Make it clear that the indemnity will only apply if the customer acts negligently or breaches the agreement with the service provider
Consider making the indemnity two-way – so that that the supplier or service provider will also be liable if they act negligently or breach the agreement
Like indemnity clauses, auto-renewal clauses have also become virtually standard. In the HVACR sector, these clauses are often seen in duct cleaning contracts, equipment servicing agreements and remote-monitoring agreements.
Where services are being provided for a set term (say 12 months), an auto-renewal clause will typically provide that a contract automatically renews for a further term (say, a further 12 months) unless the customer cancels the contract by a certain deadline.
An auto-renewal clause in this format is likely to be caught by the new laws.
Here are some steps that could help to bring the clause in line with the new laws:
A prominent statement at the top of the contract alerting the customer to the auto-renewal clause
Sending a reminder that the contract end date is nearing, and that the contract will automatically renew if the customer does give notice by a certain date
Shortening the period of auto-renewal to 3 or 6 months instead of 12 months
For a more detailed explanation of the new laws and some more practical suggestions and guidance, visit www.clearscopelegal.com.au/HVAC and download a FREE copy of our eBOOK on the new unfair contracts legislation.
About the Author
Raphael Brown is the founder of Clearscope Legal, a business law firm with an industry focus in the HVACR sector. Brown is a specialist business lawyer, and regularly advises HVACR businesses on commercial contracts, regulatory compliance, intellectual property and dispute resolution.
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