Changes to Unfair Contract Terms Laws - Your Guide

From 9 November 2023, Courts can impose substantial penalties on organisations that propose, use or rely on unfair contract terms in their standard form contracts with consumers and small businesses. Previously, Courts could only declare specific terms unfair and therefore void.

What is an unfair contract term?

A term may be considered unfair if:

• it would cause a significant imbalance in the parties’ rights and obligations under the contract;

• it is not reasonably required to protect the legitimate interests of the party who benefits from it; and

• it would cause detriment (whether financial or otherwise) to a party if it was applied or relied on.

Does this apply to my organisation?

These laws apply to your organisation if it uses standard form contracts to contract with individuals or small businesses. Most businesses are ‘small businesses’ under these laws - i.e. any business with less than 100 employees or which makes less than $100 million annual revenue.

These laws apply no matter what the value of the contract is.

These laws apply to all standard form contracts made or renewed on or after 9 November 2023 and any term of a standard form contract if it is varied or added on after 9 November 2023.

What happens if a contract term is found to be unfair?

Federal regulators, state-based consumer protection agencies and a party to the standard form contract can all apply to the Court for orders against your organisation. The Court can make a wide range of orders, including orders for compensation, voiding contract terms, and financial penalties of up to $50 million for a corporation, or $2.5 million for individuals.

What do I need to do?

If you use standard form contract templates, you should:

• review your standard form contract templates to make sure any unfair contract terms are removed;

• make sure that if you vary any standard form contract, any inserted or amended terms are not unfair contract terms; and

• review any standard form contracts with manual or automatic renewals, and make sure they do not contain any unfair contract terms – if so, you should seek legal advice about how to remove them at the appropriate time.

If you operate a small business which has entered into a contract with unfair contract terms, you should seek legal advice about your options.

Need help?

All organisations need peace of mind that their standard form contracts don’t breach any laws. Don't navigate these changes alone. We can help you keep compliant. Reach out to our team today to find out how.

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