Businesses are encouraged to review and update their terms and conditions (T&Cs) to establish clear contractual rights and obligations regarding payments. This call to action follows a landmark decision by the Western Australian District Court involving an invoice scam that resulted in significant financial losses for one company.
In March and April 2022, Mobius issued invoices to Inoteq totalling $235,400 for services rendered. Unbeknownst to both parties, a hacker had accessed the email account of Mobius’s director. The hacker sent fraudulent emails instructing Inoteq to update payment details and transfer funds to a fraudulent account.
Despite initial doubts and an attempt to verify the change, Inoteq proceeded with the transfer. The fraud was uncovered a week later when Mobius followed up on the unpaid invoices. While $43,541 was recovered, the remaining $191,859 was irretrievably lost.
The court ruled against Inoteq, with Judge Gary Massey finding that although Mobius had some vulnerabilities, Inoteq had failed to take adequate precautions when making the payment and was ordered to pay again. The decision demonstrates the necessity for business owners to review and update their T&Cs to clarify payment rights and obligations for both parties.
Reviewing T&Cs for Clear Payment Obligations
The case highlights the growing threat of payment fraud and the need for proactive measures to safeguard businesses. One critical takeaway is the importance of well-drafted T&Cs that clearly define payment obligations and procedures.
Businesses should consider including specific clauses in their contracts to mitigate risks associated with payment fraud. For example, shifting the responsibility for verifying payment instructions to the other party, and mandating due diligence before processing payments can significantly enhance protection. Explicitly including detailed payment clauses in T’s and C’s will create clear contractual rights and obligations for the parties, which will assist in avoiding protracted disputes. By updating T&Cs to address payment fraud explicitly, businesses can protect themselves from becoming a victim of fraudulent transactions.
If you or someone you know is in need of having terms and conditions reviewed or updated, you can contact our team of experts by calling us at 9525 8688 or emailing wmd@wmdlaw.com.au.
Resources
Mobius Group Pty Ltd v Inoteq Pty Ltd [2024] WADC 114.
