Cancelation term of contract

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6 February 2020

I am hoping someone might be able to give some advice. We are a UK tech company that have clients in AU.

We have the following cancelation term in our agreement, and the client has signed this contract.

This client has canceled their contract and they are stating

"Our position is that your contract is illegal and unfair under Australian law. The 3 month notice period and automatic rollover specifically. "

Can anyone advise if they are correct?

2. Commencement and Term
2.1 This Agreement shall commence on the commencement date set out in the Purchase Order (the "Commencement Date") and shall last for a minimum period of 6 months (the "Initial Term") unless terminated earlier in accordance with Clause 11.
2.2 After the Initial Term, this Agreement shall continue indefinitely unless and until terminated:
(a) by either party giving not less than 3 fully invoiced months’ notice on the contract date to the other provided that such notice may only be served following 3 months continuous membership; or
(b) in accordance with Clause 11.
2.3 The Initial Term and any continuation of this Agreement under this Clause 2.2 shall be the term of this Agreement (the "Term").

Rob Legat - SBPL

LawTap Verified
16 February 2017
Gold Coast, Queensland
They are likely referring to the 'unfair contract terms' provisions under the Competition and Consumer Act for standard form contracts. There are a number of tests that need to be satisfied before they come into play and, even then, a review of the entire contractual relationship is needed before it can be determined whether a clause is 'unfair'.

On its own, there's no way any sort of comprehensive answer can be given from looking at one clause in isolation. An individual clause can be fair, but unfair when the whole contract is considered. Conversely, a single clause can seem unfair - but actually be deemed fair overall if it can be shown it is reasonable in the protection of the legitimate interests of the relevant party.

Even then, the unfair contracts requirements only apply to 'standard form contracts'. If the contract was properly negotiated between the parties, there's less chance they can rely on the protections.

Long story short - Can't tell from what information you've provided. There's nothing innately wrong with a 90 day termination notice requirement, so long as it's reasonable in the scheme of things.
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