Australia: Changes to unfair contract terms explained

Last Updated: 12 May 2017
Article by Ben Robertson

It is now the time to make sure that your contracts ready for the new changes, or you could be faced with a contract term being declared void.

If one or more contract terms are declared void (and thereby unenforceable) in a standard form contract, it could have wide implications for your business.

What is a standard form contract?

Standard form contracts are prevalent throughout the construction industry.

Features of standard form contracts include the following:

  • The contract was presented on a 'take it or leave it' basis;
  • One party has all the bargaining power;
  • The contract was drafted without any discussions between the parties;
  • No negotiation took place; or
  • Specific characteristics of another party weren't taken into account.

What is an unfair term?

A contract term is unfair if it:

  • Causes a significant imbalance in the parties' rights and obligations arising under a contract; and
  • Isn't reasonably necessary in order to protect the legitimate interests of the party advantaged by the term; and
  • Would cause detriment (financial or otherwise) to a party if the term were applied or relied on.

When reviewing contract terms to determine whether they are unfair, a court may take into account any matter it considers to be relevant, but must also take into account the following:

  • The extent to which the term is transparent (that is, whether it contains plain language, is legible, is clearly presented, and is readily available to any party affected by the term); and
  • The contract as a whole.

Any standard form contracts that your company uses should be checked to ensure that where contracting with small businesses they don't contain potentially unfair clauses in areas such as:

  • Termination for the convenience of one party;
  • Variations to the scope of works and contract price;
  • Extensions of time to perform works under the contract;
  • Delay damages;
  • Substitution of materials;
  • Limitation of the liability of one party;
  • Indemnities provided by one party to another.

Key actions

The changes from 12 November apply to the following:

  • Standard form contracts entered into on or after 12 November 2016;
  • Standard form contracts renewed on or after 12 November 2016; and
  • A variation of a standard form contract term on or after 12 November 2016.

Businesses that have fewer than 20 employees and an up-front contract price of $300,000 or less (or $1,000,000 or less for contract terms over 12 months) are protected under the new legislative provisions, so consider reviewing your suite of contracts now to remove any unfair terms.

Small business and the construction industry

Small business is a large proportion of the construction industry. ABS data shows that as at June 2012 businesses with fewer than 20 employees accounted for 97.7 per cent of all construction businesses and took in 49 per cent of the total income in the construction industry.

Standard form contracts are widespread throughout the construction industry and the repercussions of the new changes are massive, affecting developers, builders and sub-contractors.

Key questions

Fewer than 20 employees (including some casual staff)

The protections apply when contracting with a small business, being a business that has fewer than 20 employees, including casual staff that are employed on a regular or systematic basis.

Q: How do I know if the business I'm entering into a contract with is a small business?

A: That's a good question. Performing due diligence in the procurement stage pre-contract is advised, but with projects subject to critical time frames this may not always be practical. Accordingly there may be uncertainty about whether another contractor is a small business or not. The safest strategy is to ensure there are no unfair terms in any contracts used by your business.

Standard form contracts

The contracts that are caught by the provisions must be standard form contracts. The presumption in the legislation is that a contract is a standard form contract until proven otherwise.

Q: But I purchase my contract off the shelf, so can't I be confident that there will be no unfair contract terms?

A: A large percentage of the construction industry uses standard form contracts. Those contracts were drafted prior to the new protections for small business and care must be used to ensure that the standard form contracts don't contain unfair contract terms.

The protections are for contracts within certain up-front price brackets

The small business protections only apply to contracts where:

  • For a contract term of 12 months or less the up-front price of the contract is no more than $300,000; or
  • For a contract term of longer than 12 months the up-front price is no more than $1,000,000.
  • Note that this is the up-front price, i.e. the price of the contract at the time it is entered into. The new provisions aren't industry-specific and this one-size-fits-all doesn't cope well with common features in construction contracts that either raise or lower the contract price throughout a project, such as provisional sum item adjustments and prime cost items.

Q: The up-front contract price was $275,000 when the contract was signed, but during the build with provisional sum adjustments the contract price jumped to $310,000. Doesn't that mean that the unfair contract provisions don't apply now?

A: No. With respect to contract price, the relevant trigger is the contract price at the time the contract was signed.

It may be difficult sometimes to know whether the business you are contracting with has fewer than 20 employees and the unfair contract protections operate regardless of your knowledge, so businesses need to be careful to adopt a cautious approach to this legislative change and should ensure that contract terms do not fall foul of the unfair contract provisions.

This will avoid a potentially costly finding that one or more terms in a standard form contract are void and cannot be enforced.

Consider a review of your standard form contract suite to ensure that your business is protected.

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.

Ben Robertson
Similar Articles
Relevancy Powered by MondaqAI
ClarkeKann 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
ClarkeKann Lawyers
Related Articles
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
Registration (you must 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