Unfair contract terms

The Australian Consumer Law (ACL) protects consumers and small businesses from unfair terms in standard-form contracts.

A standard-form contract is a legal agreement made between 2 or more parties. It is made when a party makes an offer and the other party accepts it. It differs from other contracts because it is:

  • prepared in advance for signature
  • offered on a take-it-or-leave-it basis
  • not negotiable on the contract terms.

The terms in standard-form contracts must be fair.

Examples of standard-form contracts

For consumers, some common standard-form contracts are:

  • mobile phone contracts
  • gym membership contracts
  • airline ticket contracts
  • concert ticket contracts
  • utilities contracts.

For small businesses, examples of standard-form contracts include:

  • information technology contracts
  • advertising contracts
  • document handling contracts
  • security contracts
  • transport contracts.

Types of unfair terms

An unfair term:

  • unevenly balances the parties' rights and obligations
  • is included without being necessary to protect a party's legitimate interests
  • causes loss (financial or otherwise) to a party if it's applied or relied on.

It might give a party the right to amend the contract by:

  • breaking or terminating it (and avoiding penalties for doing that)
  • changing its terms
  • renewing it automatically
  • changing the upfront price without giving the affected party the option to cancel
  • avoiding or limiting the delivery of agreed goods or services
  • varying the characteristics of the goods or services to be supplied.

A term may also be unfair if it lets you:

  • decide by yourself what is a breach of contract
  • choose what the contract means
  • take no responsibility for the actions of your agents or contractors
  • pass your contract responsibilities to another party without their consent
  • in legal proceedings, limit the other party's right to sue you and what evidence they can use, and impose the burden of proof on them.

Declaring a term unfair

Only a court can declare a term unfair. The court must consider the whole contract and whether the term is clear.

A term on its own may seem unfair, but it may be reasonable when it is considered as a part of the whole contract.

If a court finds a term unfair, the term is void as if it never existed, but the contract is still valid to the extent that it can operate without that term.

Small business protections

The ACL unfair contract term protections for small businesses cover the supply of goods or services or the sale or grant of an interest in land.

They apply if:

  • at least 1 party is a small business—meaning it employs less than 100 staff, including casual employees
  • a party's turnover in the last year was less than $10,000,000.

These protections have applied to small businesses entering into or renewing standard-form contracts since 12 November 2016. For any standard-form contracts made before 12 November 2016, the ACL protections also apply to any term that was changed after that date.

2023 law changes

On 9 November 2023, law changes introduced penalties for breaches of the unfair contract term provisions.

These law changes apply to standard-form contracts made, renewed or varied on or after 9 November 2023.

Visit the Australian Competition and Consumer Commission website to how the changes apply to small businesses.

Contracts and terms not covered

Contracts and terms excluded from the protections include:

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

More information

Office of Fair Trading

Go back to Office of Fair Trading home.

Last updated:
9 December 2025