Australia: How The New Australian Consumer Law Will Affect Property Developers

Last Updated: 11 May 2010
Article by Justin Lethlean, Joanne Daniels, Murray Deakin and Travis Payne

The Trade Practices Amendment (Australian Consumer Law) Act (No. 1) 2010 (the ACL) regulates unfair terms in standard form consumer contracts. There has been considerable discussion in relation to the ACL generally, including several of our previous publications, but what does it all mean for property developers?

Application of the ACL

The ACL is likely to have a significant impact on developers' contracts with individuals, and may particularly affect off-the-plan sales where further discretions are usually provided to the developer.

Due to commence after 1 July 2010, the unfair terms provisions of the ACL provide that unfair terms in standard form contracts are void and therefore unenforceable. The ACL's unfair terms provisions will apply where the contract:

  • is a "consumer contract";
  • is a "standard form contract"; and
  • contains "unfair" terms.

What is a consumer contract?

Under the ACL, a "consumer contract" includes any contract involving a sale or grant of an interest in land to an individual wholly or predominately for personal, domestic or household use. This definition goes further than simply covering sales by a developer, and also includes any right, power or privilege granted by a developer over land.

To determine whether or not a contract of sale falls within the definition of a "consumer contract" will depend on the intentions of the Purchaser. Developers' selling agents will need to take detailed notes about prospective purchasers' intentions, such as whether they intend to purchase for investment or private purposes. The ACL will generally not apply where developers sell to investors, as sales to investors will not usually meet the definition of a consumer contract.

What is a standard form contract?

Contracts of sale between a developer and an individual will automatically be deemed to be standard form contracts, unless the developer can convince a court otherwise. This is significant since most developers actually prefer standard contracts on each development for consistency, simplicity for selling agents and to meet financiers' requirements.

Again, to comply with any challenges presented by the introduction of the ACL, developers' selling agents should record all negotiations with purchasers in order to show that purchasers had a genuine, effective opportunity to negotiate and that the contract therefore was not a standard form document. It may be that it is in the best interests of developers to ensure that purchasers are given the opportunity to have their solicitor review and negotiate a contract prior to signing. While this will delay the process of signing up a purchaser and will lead to increased costs, it will limit the risk that a contract is a standard form contract under the ACL, and is thus voidable.

What are unfair terms?

Under the ACL, a term of a developer's contract will be unfair if it:

  • causes a significant imbalance in the parties' rights and obligations;
  • is not reasonably necessary to protect the developer's legitimate interests; and
  • would cause detriment (whether financial or otherwise) to a purchaser if the term were relied on.

There are many clauses of a developer's contract of sale that operate in favour of the developer to provide flexibility in completing the project, but the imbalance in favour of the developer must be "significant" in order to breach the ACL. Whether standard industry practices as to warranties, times for completion and other discretionary terms given to the developer amount to a "significant" imbalance in favour of the developer will be determined by courts in the future.

To determine whether a term is reasonably necessary to protect developers' legitimate interests, developers may be able to provide evidence about the market in which they operate, economic factors imposed by financiers, and other regulation by councils and planning schemes that require a level of flexibility for the developer. Developers should ensure that their contracts provide only as much discretion as is necessary to deliver the end product to the purchaser rather than excessive freedom, which may be deemed unfair by the ACL.

Examples of unfair terms

Courts must consider the likelihood of detriment to a purchaser, the transparency of the term (ie whether it was drafted in a straight-talking manner) and the contract as a whole.

The ACL provides the following examples of potentially unfair terms, such as where the developer can:

  • avoid or limit performance of the contract;
  • terminate the contract;
  • penalise the purchaser for a breach or termination of the contract;
  • vary the terms of the contract;
  • renew or not renew the contract;
  • vary the upfront price without the purchaser being able to terminate;
  • unilaterally vary the characteristics of the interest in land to be sold or granted under the contract;
  • unilaterally determine whether the contract has been breached or interpret the meaning of the contract;
  • limit the developer's vicarious liability for its agents;
  • assign the contract to the detriment of the purchaser without their consent;
  • limit the purchaser's right to sue the developer; or
  • limit the evidence that a purchaser can give or impose an evidential burden on the
  • purchaser in proceedings relating to the contract.

The purchaser however, does not have the same rights against the developer. Depending on the circumstances, these types of terms may be unfair and unenforceable.

Terms are not unfair where they:

  • define the main subject matter of the contract;
  • set the upfront price payable under the contract; or
  • are required or expressly permitted by any Commonwealth or State law.


All of our developers' contracts have effective severance clauses in all sales contracts, meaning that a whole contract should generally be able to proceed if an unfair term is struck out by a court. However, if the offending unfair clause is so critical to the contract that it cannot be severed, then contracts may be at risk of being unenforceable.

Considering the ACL may significantly change the landscape on which developers negotiate and contract with individuals, developers should:

  • ensure their selling agents are aware of the ACL and keep detailed notes of whether purchasers are investors or purchasing for their own purposes;
  • keep detailed records of negotiations and concessions given to purchasers;
  • compared to their standard form contracts and in relation to any potentially unfair terms;
  • obtain an acknowledgement from purchasers that they had a genuine opportunity to review and negotiate the contract;
  • be wary of selling on a "take it or leave it" basis;
  • have their lawyers review all of their standard form contracts; and
  • have prospective financiers confirm prior to any marketing campaign commencing that they would be prepared to provide construction funding on the basis of the standard form contract.

Middletons will be conducting a review of our developer clients' standard form contracts to identify unfair terms that may breach the ACL once introduced. However, until the terms of the ACL are tested in court, there is a risk that standard practice in the property industry may be substantially out of line with the ACL and will remain a hot topic in the industry for years to come.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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.

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”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.