Australia: Australia's Unfair Contract Terms Regime Extended

Last Updated: 22 November 2016
Article by Avryl Lattin and Troy Mossley

When Australia's unfair contract terms regime was first introduced in the Competition and Consumer Act 2010 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) its application was limited to consumer contracts. In order to be caught by the regime, the relevant contract needed to involve the supply of goods or services, or sale of land, to an individual where the acquisition was wholly or predominantly for personal, domestic or household use or consumption.

From 12 November 2016, the unfair contract terms regime now applies to new standard form small business contracts entered into or renewed, and to any variation of terms in existing standard form small business contracts. Assuming that no exclusions apply to the particular contract or the relevant term, a term in a standard form small business contract can be declared unfair by a court and rendered void (i.e. that term will be of no legal effect or not legally binding on the parties). Importantly, the remainder of the contract will continue to bind the parties if it is capable of operating without the unfair term. 

As noted in our earlier update, these changes are likely to impact certain industry specific contracts, including construction industry contracts. The extension of the unfair terms regime will also have implications for a wide range of business-to-business standard form contracts across other sectors including IT and IP licensing agreements, and terms and conditions of supply with smaller suppliers or distributors.

A 'small business contract'

A 'small business contract' is a contract that meets each of the following criteria:

  • the contract is for the supply of goods or services, or the sale or grant of an interest in land;
  • at the time the contract was entered into, at least one party to the contract is a small business – that is, a business that employs less than 20 people (including casual staff employed on a regular or systematic basis); and
  • the upfront price payable under the contract is no more than AUD300,000, or AUD1million if the contract is for more than 12 months.

The upfront price payable under the contract is the definite price payable for goods and services obtained under the contract which is disclosed at, or before, the time the contract is entered into, and excludes any contingency fees or amounts, and any interest payable.

What is an Unfair Contract Term?

For a term in a standard form small business contract to be deemed by a court to be unfair, it must satisfy each of the following three criteria

  • it would cause a significant imbalance in the parties' rights and obligations arising under the contract;
  • it is not reasonably necessary in order to protect the legitimate interests of the advantaged party; and
  • it would cause detriment (whether financial or otherwise) to the other party if it were to be relied upon.

In determining whether a contract term is unfair, a court may also take into account the contract as a whole, the extent to which the term is transparent, the likelihood of detriment and any other matter the court thinks is relevant. There is no requirement to demonstrate reliance or actual detriment by the small business counterparty on the contractual term.

Terms that will be subject to the most scrutiny are terms that permit one party to:

  • avoid or limit the performance of the contract;
  • vary, renew or terminate the contract;
  • vary the price or characteristics of what is to be supplied (without the other party being able to terminate the contract);
  • unilaterally determine if the contract has been breached;
  • penalise the other party for breach or termination;
  • limit the other party's right to sue;
  • impose the evidential burden on the other party in proceedings relating to the contract;  
  • limit the evidence the other party can adduce in proceedings relating to the contract; or
  • assign the contract without consent.

An application for a declaration that a term is void can be made by the other person to the contract, the Australian Competition and Consumer Commission (the ACCC), or the Australian Securities and Investments Commission (ASIC).

It is worth noting that the above list of terms that may be subject to scrutiny is not definitive. Judicial proceedings may determine that other categories of terms in standard form contracts are unfair and unacceptable, including, for example, indemnities, which may be subjected to particular scrutiny at some point in the future.

Excluded terms

Various contractual terms continue to be excluded from the operation of the unfair contract terms regime including:

  • terms that define the main subject matter of the contract;
  • terms that set the upfront price that is payable; or
  • terms that are required or expressly permitted by a law of the Commonwealth, or a state or a territory (e.g. permitted under the Franchising Code or another prescribed industry code).

Excluded contracts

While the application of the unfair contracts regime in Australia has been extended, a number of contracts remain excluded from the unfair contract terms regime. 

All insurance contracts regulated by the Insurance Contracts Act 1984 (Cth) are still excluded from the regime, although expansion of the regime to cover insurance contracts has previously been proposed. While insurers have resisted such moves on the basis that existing laws sufficiently protect consumers, we expect consumer advocacy groups will continue to push for further extension of the unfair contract terms regime into this sector.

Certain shipping contracts are also excluded from the regime including contracts of marine salvage or towage, charterparty of a ship and contracts for the carriage of goods by ship.

Lastly, constitutions, including the constitutions of many superannuation funds, companies, and managed investment schemes, are not caught by the regime.

What do you need to do?

The extension of this regime to 'small business contracts' follows a 12 month transition period. The ACCC has been active in enforcing the regime in relation to consumer contracts and we expect it will also look to score some early runs in seeking to protect small businesses.

As a starting point, and if in doubt, you should seek further information about your counterparty to determine whether they fall within the definition of 'small business'.

If you are engaging with small businesses in Australia and relying on standard form contracts you should assess the terms of its standard form contracts.

In preparing new standard form contracts, renewing standard form contracts, or varying terms within an existing standard form contracts, you should now be asking:

  • What is the justification for a term?
  • What legitimate interest is the term trying to protect?
  • Is there an alternative way to protect that legitimate interest?
  • Can the term be drafted in a more balanced way?

If terms in your standard form contracts are, or have the potential to be, unfair, you should consider amending or removing the term. If there is uncertainty as to whether a term could be considered to be unfair, you could consider using a tiered approach as has been applied in restraint of trade clauses.

Australia's unfair contract terms regime extended

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”

Related Video
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.