Unfair Contract Terms: Examples In Australia

If you run a small business in Australia, chances are you use “standard” contracts or sign them from suppliers, platforms and landlords every week.

From November 2023, Australia’s unfair contract terms laws changed significantly - and the penalties for proposing or relying on unfair terms can be severe.

In this guide, we’ll walk through what counts as an unfair contract term under the Australian Consumer Law (ACL), practical examples to watch out for, and how to fix risky clauses in your own agreements without losing legitimate protection.

We’ll also share simple drafting tips and negotiation strategies so you can protect your business and stay compliant.

What Is An Unfair Contract Term Under The ACL?

Unfair contract terms (UCT) rules sit under the Australian Consumer Law (ACL). A term can be unfair if it:

• Creates a significant imbalance in the rights and obligations of the parties
• Is not reasonably necessary to protect the advantaged party’s legitimate interests
• Would cause detriment (financial or otherwise) if relied on

Court and regulator guidance also looks at transparency (is the term expressed plainly and clearly?) and the contract as a whole. A harsh clause hidden in fine print is more likely to be unfair than one that’s prominent, explained and balanced with other rights.

These rules apply to standard form contracts - that’s most “take it or leave it” agreements you issue online or send as a template - and they now cover a broader range of small business contracts. If your counterparty has fewer than 100 employees or turnover under $10 million, the regime likely applies. The reforms also introduce penalties for proposing, using or relying on unfair terms.

If you’re unsure where you stand, it’s wise to consider a UCT review of your standard agreements.

9 Common Examples Of Unfair Contract Terms (And Fair Alternatives)

Below are common clauses small businesses encounter (or sometimes include unintentionally) that risk being unfair. For each, we also flag what a fairer version could look like in practice.

1) Unilateral Price Increases Without A Right To Exit

The problem: A supplier reserves the right to increase fees at any time, without notice, and the customer must keep the contract regardless.

Why it’s risky: It creates a significant imbalance and can cause immediate financial detriment.

Fairer approach: Provide reasonable notice (e.g. 30 days), a cap or objective basis for increases (such as CPI or pass-through of third-party costs) and allow the other party to terminate without penalty if they don’t accept the new price. If you do charge late fees, ensure they’re reasonable and proportionate to your actual costs of chasing payment.

2) Automatic Renewals With Hidden Traps

The problem: A contract auto-renews for long periods unless the customer cancels within a narrow window using a specific method that’s hard to find.

Why it’s risky: This can “lock in” a party unfairly, especially if the term is buried in fine print.

Fairer approach: Make renewal terms prominent, send renewal reminders, keep the opt-out method simple, and limit the renewal period (e.g. month-to-month after the initial term). Pair renewals with a reasonable notice period for termination.

3) One-Sided Termination Rights

The problem: One party can terminate “for convenience” at any time, but the other party can only terminate for serious breach (or not at all).

Why it’s risky: The imbalance is obvious, and termination can cause serious operational detriment.

Fairer approach: If you need a convenience termination right (e.g. for operational flexibility), mirror it for the other party or build in balanced alternatives such as tiered notice periods, partial refunds where services aren’t provided, or a short initial term with options to extend.

4) Unlimited Liability (For Them) And Very Limited Liability (For You) - Or Vice Versa

The problem: A clause that excludes almost all liability for one side, regardless of fault, while holding the other party fully responsible for every loss.

Why it’s risky: Extremely one-sided limitation of liability terms are a common UCT trigger, particularly if they exclude liability for losses you control.

Fairer approach: Use balanced caps (for example, the higher of 12 months’ fees or a set amount), carve-outs for serious misconduct (fraud, wilful misconduct), and ensure consumer guarantees and non-excludable rights under the ACL are respected. Be careful with exclusions for consequential loss - they should be clear and not used to dodge responsibility for foreseeable, direct harm you cause.

5) Broad, All-Risk Indemnities

The problem: An indemnity that makes one party liable for “any and all losses” arising in any way from the contract - including losses caused by the other party’s own negligence.

Why it’s risky: Overly broad indemnities can shift unlimited risk to the weaker party.

Fairer approach: Limit indemnities to specific risks you don’t control (e.g. third-party IP claims stemming from the other party’s materials), exclude losses caused or contributed to by the indemnified party, and align them with your insurance coverage.

6) “No Refunds” Or Forfeiture Of Large Deposits

The problem: A term says “no refunds under any circumstances” or lets you keep a large “deposit” even if you haven’t suffered a comparable loss.

Why it’s risky: The ACL prohibits misleading “no refunds” messaging and penalties must be proportionate. Blanket forfeiture is a red flag.

Fairer approach: Use clearly described cancellation fees that reflect reasonable pre-estimated losses (and your genuine costs). If you take a deposit, make it proportionate to the booking or production cost. Our guide on non‑refundable deposits covers this in more detail.

7) Unilateral Variation Of Key Terms

The problem: One party can change the scope, service levels, deliverables or other core terms at any time without consent.

Why it’s risky: This undermines certainty and can cause immediate detriment to the other party.

Fairer approach: Allow changes only for minor non-material updates, use a change request process, or require mutual written consent for material changes. If you must vary standard policies, provide notice and a right to terminate where material detriment arises.

8) Set-Off And Withholding Rights That Go Too Far

The problem: A clause lets you set off unrelated amounts or withhold payments entirely based on any alleged issue.

Why it’s risky: Overbroad set-off or withholding can starve a small supplier of cash flow and can be unfair in standard form contracts.

Fairer approach: Limit set-off to amounts that are due and payable, clearly connected to the same transaction, and genuinely undisputed. If you use a Terms of Trade style document, keep payment protections tight but proportionate.

9) Evidence And Liability “Shortcuts”

The problem: Clauses that say your records are conclusive evidence of anything unless the other party proves otherwise within an unrealistically short window, or that the other party accepts all risk regardless of your conduct.

Why it’s risky: These can unfairly shift the burden of proof or risk.

Fairer approach: Use reasonable evidence provisions and dispute timeframes, and don’t try to contract out of duties you control (for example, data security measures that only you can implement).

Grey Areas: When A Tough Clause Can Still Be “Fair”

Not every strong clause is unfair. The key is whether it is reasonably necessary to protect your legitimate interests, and whether it’s transparent and proportionate.

• Service levels: If you promise aggressive SLAs, a balanced limitation of liability cap might be necessary to keep pricing sustainable.
• Cost pass-throughs: Where your upstream suppliers change prices, a limited, transparent pass-through mechanism with notice can be reasonable.
• IP protection: If you’re licensing proprietary tech, it’s reasonable to restrict reverse engineering and assert ownership of your underlying IP.
• Health and safety: Indemnities that allocate risk for a party’s own staff or equipment can be appropriate where control sits with that party.

The test is always context. Ask: What risk am I managing? Is this the least restrictive way to manage it? Have I made the term clear and prominent?

How To Audit Your Contracts For Unfair Terms

A simple, step-by-step process will help you identify red flags fast.

1) Identify Which Contracts Are “Standard Form”

Pull together your templates: online terms, order forms, master service agreements, supplier agreements and platform terms. If you regularly issue a fixed template or accept someone else’s without negotiation, treat it as standard form.

2) Map Where The UCT Regime Applies

Note which counterparties are likely small businesses (under the new employee or turnover thresholds) or consumers. Most B2C and a lot of B2B will be in scope after the reforms.

3) Flag High-Risk Clauses

Look for the examples in this article: unilateral changes, renewal traps, extreme liability exclusions, broad indemnities, “no refunds”, penalty-style charges, and evidence shortcuts.

4) Stress-Test Transparency

Are key terms clear, easy to find and written in plain English? Would a reasonable person be surprised by the way your clause operates? If so, rewrite or move it to a prominent section and use headings, summaries and examples.

5) Rebalance, Don’t Overreact

You rarely need to delete protections entirely. You can cap liability fairly, use notice periods for changes, and shape cancellation fees so they reflect real costs. Keep protections necessary and proportionate.

6) Update Customer-Facing Messaging

Make sure your website and sales collateral align with your contract. Avoid “no refunds” statements and ensure any claims comply with the Australian Consumer Law (for example, around quality guarantees, misleading representations and advertised prices).

7) Train Your Team

Sales and customer support should understand how renewals, cancellations, refunds and price changes work in practice. Inconsistent communications can undermine transparency and create risk.

Drafting Tips: Turning Red Flags Into Strong, Compliant Clauses

Here are practical wording moves that keep your contracts protective and on the right side of the law.

• Use clear headings and summaries: Put key commercial risks (price changes, renewal, termination fees) up front with short explanations.
• Link rights and responsibilities: If you need a strong right (e.g. to suspend for non-payment), build in notice and a cure period.
• Cap liability smartly: Tie caps to fees paid over a recent period and include carve-outs only for critical risks (fraud, wilful misconduct, personal injury where relevant).
• Define “consequential loss”: If excluding it, say what you mean in plain language and avoid using it to dodge responsibility for direct, foreseeable losses you cause.
• Charge proportionate fees: If you include late fees or cancellation charges, make them reasonable and explain the cost basis. Our guide to late fees covers what’s acceptable.
• Keep variation rights narrow: Reserve unilateral changes for minor or external policy updates, and give notice plus a right to exit where changes materially disadvantage the other party.
• Balance indemnities: Limit them to risks in the other party’s control and exclude losses caused by the indemnified party’s negligence.

Receiving Contracts: How To Push Back On Unfair Terms

When a supplier or platform sends you their standard terms, you don’t have to accept everything. Here’s a simple negotiation playbook.

• Ask for symmetry: If they have a convenience termination right, request one too, or at least a shorter initial term.
• Fix price-change clauses: Add notice, tie increases to objective indices, and include a right to exit if you don’t agree.
• Cap your exposure: Propose a reasonable liability cap and ensure mutual carve-outs for serious misconduct. If they exclude all consequential loss, clarify what that does and doesn’t include.
• Make deposits fair: If they want a large upfront payment, link forfeiture to genuine costs and include partial refunds for early cancellations where possible. Point to commercial realities and the ACL - sweeping “no refunds” positions are high risk.
• Tidy set-off rights: Limit set-off to undisputed, due amounts arising under the same agreement.
• Protect your IP and data: Keep your ownership of pre-existing IP and clarify how your confidential information and customer data will be handled.

Even small edits can meaningfully reduce your risk. Where stakes are higher, consider switching to your own Customer Contract or Terms of Trade so you’re negotiating from a fair starting point.

Where Do Unfair Terms Commonly Hide?

In our experience, the same hotspots appear again and again in small business contracts:

• Pricing and payment: automatic indexation, undisclosed surcharges, aggressive suspension rights, and penalty-style fees
• Term and renewal: long initial terms, narrow cancellation windows, and burdensome notice methods
• Liability: sweeping exclusions, very low caps that don’t reflect deal size, and carve-outs that only run one way
• Indemnities: “any and all loss” clauses, indemnities for the other party’s negligence, and open-ended third-party risk
• Service levels and scope: unilateral changes to deliverables, right to downgrade inclusions, or moving goalposts on acceptance criteria
• Evidence and process: “our records are conclusive” clauses, and unreasonably short dispute windows

Target these sections first in any review, and benchmark them against your genuine commercial risks and costs.

Turn Compliance Into A Competitive Advantage

Fair, transparent contracts don’t just keep you onside with the law - they improve sales conversion and reduce disputes.

Plain-English terms build trust. Clear renewals and refund processes make you easier to buy from. Balanced liability caps and sensible indemnities avoid deal fatigue at the finish line.

If you’re updating your agreements anyway, it’s a great time to tighten your legal boilerplate across the board. For example, ensure your ACL compliance wording is accurate, your IP ownership and licensing are clear, and your marketing claims align with the ACL’s rules on misleading or deceptive conduct. If you advertise prices, be sure the fine print matches the headline, consistent with Australia’s advertised price laws.

Key Takeaways

• Under the ACL, a term can be unfair if it creates a significant imbalance, isn’t reasonably necessary to protect legitimate interests, and would cause detriment.
• Watch for red flags such as unilateral price changes without exit rights, renewal traps, one-sided termination, extreme liability exclusions, broad indemnities, and “no refunds” positions.
• Most risky clauses can be reworked - use notice periods, proportionate caps, balanced indemnities, and transparent, prominent wording.
• Align your website, sales collateral and contract terms with the Australian Consumer Law to avoid inconsistent messages and compliance issues.
• When receiving a supplier’s template, ask for symmetry, cap your exposure, and push for practical exit rights if key terms change.
• A focused UCT review and updates to your standard Terms of Trade or Customer Contract can turn compliance into a sales and risk advantage.

If you’d like a consultation on reviewing your contracts for unfair terms, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.