Australia: ASIC issues reminder for businesses to check for unfair contract terms

Last Updated: 5 February 2016
Article by Narelle Smythe

The release this week of the Australian Securities and Investments Commission's (ASIC's) Media Release 16-018MR and Information Sheet 221 provides a timely reminder for businesses to review their progress towards ensuring that their standard form contracts comply with the new provisions prior to 12 November 2016. Information Sheet 221 also contains ASIC's guidance on the new protections for small businesses, including guidance on which contracts will be covered by the new provisions and examples of terms a Court may declare to be unfair under the regime.

This reminder follows the release of the Australian Competition and Consumer Commission's (ACCC's) Media Release 223/15 on 17 November 2015. ASIC has set out its expectation that the transition period should be used by businesses to review relevant standard form contracts.

The new protections

The unfair contract terms regime currently provides protections for consumers. Under the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 these protections are extended to apply to small business contracts from 12 November 2016, when the upfront price payable does not exceed $300,000 or $1,000,000 if the contract period is more than one year. For contracts under which credit is or is to be provided, any interest payable under the contract is excluded from the assessment of the upfront price payable (in addition to any amounts excluded from the assessment under section 12BI(2)). A small business for the purposes of the regime is a business that employs fewer than 20 people at the time the contract is entered into (including casual staff employed on a regular or systemic basis).

Under the regime a Court may find that a term in a contract is unfair and therefore void. Upon such a finding, the Court may also make a range of orders, including:

  • declaring all or part of a contract to be void;
  • varying a contract;
  • refusing to enforce some or all of the terms of a contract or arrangement;
  • directing a party to refund money or return property to the small business affected; or
  • directing a party to provide services to the small business affected at the party's expense.

ASIC's examples

Information Sheet 221 provides three examples of small business contract terms that ASIC believes may raise concerns. These examples are set out below:

  • Lender's legitimate interests: A term of a loan contract under which a default by the small business borrower results in the small business being liable to pay large and excessive default fees (imposing an unfair cost on the small business that exceeds the amount required to protect the lender's legitimate interests).
  • Automatic rollover: A term of a fixed-term lease under which the small business is automatically entered into another fixed-term lease upon the end of the lease term unless it elects to purchase the goods or it has made arrangements to return the goods, where the small business is subject to early termination fees to exit the new lease contract. ASIC provides that the term would be less likely to raise concerns if there was not a consequence to the small business if it decided to immediately end the new lease.
  • Right to unilaterally vary the contract: A term of a loan contract under which the lender has the right to vary any term or condition of the contract if notice is given in writing, including terms relating to interest or fees, and the small business does not have the right to end the contract even if the lender increases its fees significantly (ASIC then provides an example percentage of 20%). ASIC provides that the term would be less likely to raise concerns if there was an additional term in the contract that provided a right for the small business to immediately cancel the contract without consequence if the price or services change.

What you need to do

The new provisions take effect in just over 9 months' time on 12 November 2016. Businesses should ensure that they identify and review all of their standard form contracts which could potentially be entered into with a small business and have an upfront price payable which is less than $300,000 or $1,000,000 if the contract period is more than one year (accounting for any exclusions).

The new provisions apply to standard form contracts entered into on or after 12 November 2016, however also apply to any contract that is renewed on or after that date. Existing contracts that may be renewed on or after 12 November 2016, as well as contracts which are scheduled for rollover after that date, should therefore also be reviewed. Terms that are varied on or after that date will also be subject to the regime.

Where ASIC identifies a potentially unfair contract term during the transition period it will bring the term to the attention of the relevant business and work with them to remove the term from the standard form contract/s. While only a Court can decide whether or not a term is unfair, ASIC may consider enforcement action when businesses using such terms are uncooperative or refuse to make ASIC's recommended changes.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Holley Nethercote commercial & financial services lawyers
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Holley Nethercote commercial & financial services lawyers
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions