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Standard T&Cs are great for business.
Having solid T&Cs with your customers ensures you secure a good deal every time, including clarity on how – and how much – you get paid, a concise description of the goods or services you’re providing, and protecting you from excessive liability if something goes wrong.
If you’re running a business, it’s always a smart idea to have standard business terms and conditions in place.
But are they good for your customers? And does that really matter for your business? Think about yourself as a customer for a moment:
How many times do you click ‘I agree’ on terms and conditions without giving them a proper look?
If you’re like most people (and not a legal eagle like us!), it’s probably almost every time.
While we would advise you NOT to sign T&Cs without reading them, we understand that they can be long, boring, and downright confusing.
Plus, sometimes it feels like you have no other option.
Every time your favourite app updates its T&Cs, do you ever think – “What does it matter if I agree? I still need to use the app!”
The thing is, as mundane as T&Cs may seem, they form a legally binding contract.
So, whether you read them or not, if you accept them, you are legally bound by their terms.
Doesn’t feel fair, does it? That’s why the law protects consumers against unfair contract terms. As a business owner, you need to understand these terms too – because including unfair clauses in your standard T&Cs could mean you might not be able to enforce them later on!
It’s important, therefore, to familiarise yourself with what constitutes an unfair contract term and what that means for your business.
Note: Unfair contract terms have been refined following recent legislative updates that came into effect in early 2024. You can read more about these changes here.
What Is An Unfair Contract Term?
In Australia, we have robust legal protections in place for consumers – primarily under the Australia Consumer Law (ACL).
The ACL is designed to protect the ordinary consumer – that is, the person who doesn’t always read standard terms and conditions in great detail.
That’s why, under the ACL, specific rules apply to standard form contracts regarding unfair contract terms. In short, the law safeguards consumers against contracts that would leave them at a disadvantage.
This also brings us to the question of what is considered ‘unfair’ under Australian law – but don’t worry, we’ll cover that shortly.
We’ve established that unfair contract term rules apply to standard form contracts. The next question is, ‘What exactly is a standard form contract?’
What Is A Standard Form Contract?
A standard form contract is generally a contract drafted by one party, with little or no opportunity for negotiation.
To put it simply, it’s a ‘take it or leave it’ contract.
Industries that typically use standard form contracts include:
- Telecommunications
- Finance
- Domestic Building
- Gyms
- Car rentals
- Travel
- Utilities
The laws around unfair contract terms apply to standard form contracts between small businesses and individual consumers.
The ACL has also been updated to better protect small businesses from unfair contract terms. This applies to standard form contracts entered into or renewed on or after 12 November 2016, in scenarios such as:
- The contract is for the supply of goods or services, or for the sale or grant of an interest in land.
- At least one party is a small business that employs less than 20 people.
- The upfront contract price is $300,000 or less – or $1 million or less if the contract lasts for more than 12 months.
What Makes A Contract Term ‘Unfair’?
For a contract term to be considered ‘unfair’, it must meet all three of the following conditions:
- It causes a significant imbalance in the rights and obligations of the parties.
- It is not reasonably necessary to protect the legitimate interests of the party receiving the benefit.
- It causes detriment (for example, delay or financial loss) to a small business if enforced.
A term might also be unfair if it permits one party to, for example:
- Avoid or limit its obligations under the contract
- Terminate the contract unilaterally
- Vary the terms of the contract without mutual agreement
Another example is a term that penalises one party for breaching or terminating the contract while allowing the other party to do so without consequence.
Overall, the laws around unfair contract terms protect consumers and small businesses when they have little or no opportunity to negotiate with more powerful entities.
Are There Any Exceptions?
Yes, there are exceptions.
Certain contracts and terms are excluded from the unfair contract laws.
Contracts not covered by these laws include:
- Shipping contracts
- Constitutions of companies, managed investment schemes or other corporate bodies
- Most insurance contracts
- For small businesses, contracts entered into before 12 November 2016 (unless they have been varied thereafter)
Similarly, terms that are not covered by these laws include:
- Terms that simply describe the subject matter of the contract (for example, the goods or services being supplied)
- Terms that set out an upfront price
- Terms that are required by law
- Any terms that have been genuinely negotiated by the parties
In other words, terms falling into these categories are not deemed unfair and are permitted by law.
What Happens If You Have An Unfair Term In Your Contract?
Ultimately, it’s up to the court to decide whether a contract term is unfair.
If a court finds a term to be unfair, that term will be declared void under section 23(1) of the ACL – meaning it is not binding on the parties.
This does not necessarily void the entire contract; rather, the contract will continue to operate to the extent that it can function without the unfair term.
New Penalties For A Breach Of Unfair Contract Laws
Previously, the worst consequence for including an unfair term was merely its nullification. However, amendments introduced in 2022-fully enforced from early 2024 and in force through 2025-now impose significant penalties. Businesses may face fines of the greater of $50 million or three times the value associated with the breach.
These stricter measures apply not only to standard form contracts but also extend to a broader range of small business agreements. In particular, they cover small businesses employing fewer than 100 people or those with an annual turnover of less than $10 million.
It’s crucial for businesses to review their contracts regularly to ensure compliance. Seeking expert legal advice now can help you avoid heavy penalties later.
Our lawyers at Sprintlaw specialise in reviewing and redrafting contracts to ensure they comply with the ACL. Learn more about our contract review services to safeguard your business.
Construction Contracts
If your business operates in the construction industry, it’s vital to note that the recent changes extend beyond standard form contracts. The updated definitions now include consultancy, supply, and subcontractor agreements.
As many construction contracts fall under these categories, a thorough review and, if needed, redrafting is highly recommended. Our team can assist with construction contract reviews to ensure your agreements remain fair and compliant.
If you need legal advice on updating your construction contracts, our experts are here to help.
How To Tell If You Have Unfair Terms In Your Contracts
The court takes into account a range of factors when determining whether a contract term is unfair. And let’s face it, the last thing you want is for your business to end up in court over a disputed term!
It’s therefore wise to address any potential issues before they escalate. For instance, our contract review service can help identify and rectify terms that might be considered unfair.
More specifically, the courts will consider the transparency of a term and the context provided by the entire contract.
The simplest way to avoid incorporating an unfair term is to obtain legal advice while drafting your agreement.
If you suspect your contract may contain unfair terms, consider these questions:
- Will the contract term cause an imbalance in the rights and obligations between you and the other party?
- Is the term necessary to protect the legitimate interests of your business?
- Could the enforcement of the term result in significant detriment to the other party?
Another key factor is the transparency of the term. Is it hidden in fine print or written in complex legal jargon that your customer is unlikely to understand?
A term is considered transparent if it is written in plain language, is clearly legible, presented prominently to all parties, and easily accessible.
The less transparent a term is, the more likely it is to be ruled unfair.
Unfair Contract Term Example
Imagine you run an IT services company that enters into a two‐year agreement with a small business. Your contract includes a term granting you the right to change your service prices at any time without prior notice, while the termination clause prohibits the small business from ending the contract within the two-year period.
Such terms are likely to be deemed unfair because they create a significant imbalance between your rights and those of the other party.
Fujifilm Case
When courts interpret contractual terms, it becomes clear just how broadly the ACL can be applied. In a landmark decision, the ACCC’s action against Fujifilm led to a court ruling in August 2022 that 38 terms in Fujifilm’s standard form contracts were unfair. This precedent, which remains highly relevant in 2025, underscores the risks of including one-sided clauses in your contracts.
The court identified unfair terms such as:
- Automatic renewal provisions
- Disproportionate termination clauses
- Limitation of liability clauses
- Unfair payment terms
- Unilateral variation clauses
What To Take Away…
The bottom line is that including unfair terms in your standard customer contracts is detrimental to both your business and your customers.
There are often clauses that you might not even realise are unfair – especially if you’re not legally trained.
If you routinely use one standard contract with your customers, you want to ensure that it is legally sound. The last thing you want is to discover that your contract contains an unenforceable term, potentially resulting in costly legal complications.
Even if your business uses contracts that are not deemed standard form contracts, it’s wise to have them reviewed since the recent changes extend ACL protections to other types of agreements under the updated definition of a ‘small business contract’.
The best approach is to engage a qualified business lawyer experienced with the ACL to draft or review your agreements.
As we move further into 2025, staying proactive about legal compliance has never been more crucial. Regular contract reviews not only help you avoid the pitfalls of unfair terms but also empower you to negotiate better agreements that reflect today’s market environment. With tools such as Sprintlaw’s contract review service and expert legal guidance – including insights from our business set-up guide – you can secure your business interests and build strong, transparent relationships with your customers.
If you need help with your standard terms and conditions – or if you think your customer contracts may contain unfair terms – feel free to get in touch with us at Sprintlaw, and we’d be happy to assist you.
If you would like a consultation on your options going forward, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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