Australia: Are You Being Served: Unfair Contract Terms

Last Updated: 23 October 2009
Article by Alexandra Wedutenko

Key Points:
Entities should review their use of standard form contracts to ensure that they comply with the regime.

On 24 June 2009, the Trade Practices Amendment (Australian Consumer Law) Bill 2009 (the Unfair Contracts Bill) was introduced into Parliament.

The Unfair Contracts Bill will implement the Australian Government's policy of increasing protection for consumers, increasing competition and establishing national consistency in the regulation of contractual relationships.

Importantly, the Unfair Contracts Bill seeks to void terms in standard form consumer contracts that are found to be "unfair", and impose penalties on the corporations that use unfair contracts. However, the Bill is now more limited than the originally proposed exposure draft.

The unfair contracts regime

The Unfair Contracts Bill contains a series of provisions (the unfair contract term provisions) which seek to amend the Australian Securities and Investments Act 2001 (Cth) to regulate unfair terms in contracts for financial services and financial products, and the Trade Practices Act 1974 (Cth) to regulate unfair terms in contracts for goods and services other than financial services.

The basic operation of the unfair contract term provisions is:

The unfair contract terms provisions apply to consumer contracts ...

The unfair contract terms provisions are proposed to apply to standard form contracts entered, renewed or varied after 1 January 2010 under which an individual acquires goods, services or interests in land for personal, domestic or household use or consumption (consumer contracts).

If those consumer contracts are standard form contracts.

A contract is presumed to be a standard form contract if that is alleged by one party, unless proven otherwise. A court adjudicating this issue can take into account any factors that it considers relevant, although it must consider the factors listed in the Unfair Contracts Bill. These include whether:

  • there is a significant imbalance in the bargaining power between the parties;
  • the contract was prepared by one party before the transaction was contemplated; and
  • the party asked to accept the contract had an effective opportunity to negotiate its terms.

The unfair contract terms provisions regulate unfair terms.

A term in a standard form consumer contract will be unfair if:

  • it causes a significant imbalance in the parties' rights and obligations arising under the contract, and
  • it is not reasonably necessary to protect the legitimate interests of the party advantaged by the term. Interestingly, an unfair term is presumed not to be reasonably necessary unless the party advantaged by the term proves otherwise.

The Unfair Contracts Bill also gives examples of terms that may be unfair. These are generally terms that grant a broad right to, or impose a harsh consequence on, one party to a contract but not the other. Unfair terms will include:

  • terms that penalise one party but not the other for breaching the contract
  • terms that allow one party to vary the upfront price payable under the contract
  • terms that permit unilateral variation of the contract, and
  • terms prescribed in the regulations.

Matters that must be taken into account when considering whether a term is unfair are also specified, although courts are also given a broad discretion to take into account any other matters that they consider relevant. The matters mandated for consideration include whether the term is transparent, the extent to which the term will cause detriment if enforced, and the contract as a whole.

Unfair contract terms are void.

If a provision in a standard form contract is found to be an "unfair contract term", it will be void. The contract will still be valid if it is able to operate without the void term. This is consistent with case law regarding the severability of unlawful terms.

Ultimately, the decision as to whether a contract term is void for unfairness will be one that will need to be made by a court. A consumer will not be able to unilaterally declare that the contract is unfair in order to walk away from performing it.

Prohibited terms are also void ... and may result in a fine.

There is also scope for regulations to classify certain terms as "prohibited terms". If a prohibited term is included in a standard form consumer contract, it will also be void, and the offending entity could be fined.

There are some exceptions to the application of the unfair contract terms provisions

Among other things, the unfair contract provisions will not apply to:

  • shipping contracts, employment contracts, or constitutions of companies, managed investments schemes or other bodies; or
  • terms that define the main subject matter of the contract, set the upfront price payable under the contract, or are required or expressly permitted by law.

What does this mean for business and government standard form contracts?

Business and government commonly use standard form contracts. For example, government uses standard form contracts when dealing with suppliers for the provision of goods and services. The implementation of the unfair contract terms provisions in their original form would have required an overhaul of standard form contracts across the board.

As amended however, the Unfair Contracts Bill will not affect the majority of business-to-business or government-to-business contracts. The Government has however indicated that it will further consider whether business-to-business standard form contracts, particularly those involving small businesses, should be captured by the unfair contract terms provisions. It has also foreshadowed a review of the unconscionable conduct provisions of the Trade Practices Act, particularly the protections afforded to (smaller) businesses dealing with businesses with greater market and bargaining power.

The Unfair Contracts Bill will affect individuals' rights in relation to standard form contracts. Also, where the unfair contract terms provisions apply, entities should review their use of standard form contracts to ensure that they comply with the regime, which will involve a reassessment of contractual positions and approaches to contracting.

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.