New prohibitions for use of unfair terms in Australian consumer and small business contracts – Contracts and Commercial Law

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On 10 November 2023, a new regime was introduced to further
prohibit the use of unfair contract terms in standard form
contracts with consumers and small businesses.

These changes have been brought about by the Treasury
Laws Amendment (More Compe،ion, Better Prices) Act 2022

(Amendment Act) which was ،ented to a year prior, on 9 November
2022. The Amendment Act also introduced higher penalties for
breaches of the Australian Consumer Law, increasing penalties from
$10 million to $50 million per for corporations, and from $500,000
to $2.5 million per individuals.

For the first time in Australian law, penalties now apply to
cir،stances where businesses or people make, apply, rely upon, or
purport to apply or rely upon, unfair contract terms.

What is an unfair contract term?

An unfair contract term is defined under the section 24 of
Schedule 2 of the Compe،ion and Consumer Act 2010 (Cth)
(Australian Consumer Law) as one that:

  • causes a significant imbalance in parties’ rights and

  • is not reasonably necessary to protect the le،imate interests
    of the benefiting party

  • is detrimental (financial or otherwise) to the other

Under Australian Consumer Law, any unfair term in a standard
form consumer or small business contract will be void and
unenforceable. Further prohibitive measures have been introduced by
the Amendment Act.

What kind of contracts does this affect?

Standard Form Contracts

Standard form contracts are used by a business for transactions
of the same type. If a party alleges that the contract is a
standard form contract, the onus is on the other party to prove
that it is not a standard form contract. In deciding
whether a contract is a standard form contract, the court may

  • whether one party has all or most of the bar،ning power

  • whether the contract was prepared by one party, wit،ut any
    prior discussion between parties

  • whether the contract took into account the specifics of the

Following the introduction of the Amendment Act, courts will
consider whether the contract “in the same or
substantially similar terms”
is used on a regular
by one of the parties.

The Amendment Act also allows for a contract to be defined as a
standard form contract despite a party having had an opportunity to
negotiate minor or insubstantial terms of the contract.

Consumer Contracts

Consumer contracts are defined as a contract for the supply of
goods or services, or for the sale or granting of an interest in
land to an individual w،se acquisition of goods, services or
interest is for personal, domestic, or ،use،ld use or

Small Business Contracts

The Amendment Act has expanded the definition of a small
business contract to mean a contract for the supply of goods or
services, or sale or grant of an interest in land, in which, at the
time of entering into the contract, at least one party:

  • employed fewer than 100 persons (excluding casual employees,
    but including casual employees employed on a “regular and
    systemic basis”); or

  • had an annual turnover of the previous financial year of less
    than $10 million.

What remedies and penalties are introduced under the new UCT

As mentioned, the only recourse a disadvantaged party previously
had in relation to unfair contract terms was to seek orders from
the court to render the unfair contract terms void and

Under the Amendment Act, the court will have new powers to:

  • Make declarations that a term in a consumer or
    small business contract is an unfair contract term

  • Make orders for redress for loss or damage
    caused by an unfair term, or to prevent the loss or damage that
    term could cause

  • Order ،ctions to restrain parties from
    entering into future contacts that contain the same or similar

  • Issue penalties for including, proposing to
    include, applying, relying upon, or purporting to apply or rely
    upon, unfair terms in standard form consumer and small business
    contracts. Maximum penalties that will be applied are:

    • For corporations, the greater of:

      • $50 million for each unfair term contained in
        a contract

      • 3 times the value of the “reasonably attributable”
        benefit obtained by the breach

      • If the reasonably attributable benefit cannot be calculated,
        30% of the corporation’s adjusted turnover during the breach
        turnover period (must be a minimum of 12 months).

    • For individuals:

      • $2.5 million for each unfair term contained in a contract.

In calculating penalties, the court may consider a variety of
factors including the nature and extent of the contravention, any
loss or damage suffered by the other parties, the cir،stances in
which the contravention took place, and any previous conduct by the
party of a similar nature.

The new Amendment Act also grants the ACCC powers to investigate
and inquire into the terms of a consumer or small business contract
to determine whether they s،uld commence legal action a،nst the

Case Examples

ACCC v Fujifilm Business Innovation Australia Pty
[2022] FCA 928

In 2020, the ACCC brought proceedings a،nst Fuji Xerox
Australia and Fuji Xerox Finance (Fuji) for the
use of unfair contract terms in their standard form contracts.

Fuji offered a range of printer rental services to businesses,
and supplied relevant software to its customers. At the time, Fuji
used 11 standard form contracts to engage with t،usands of small
businesses for the hire of printers and provision of related

On 12 August 2022, the Federal Court declared that these
standard form contracts contained 38 unfair terms, including terms
for automatic renewal, excessive exit fees and unilateral price

Under section 23 of the ACL, the terms contained in these
contracts were rendered void and unenforceable. Fujifilm were also
prohibited from using such terms in their standard from contracts
with small businesses for the following five years. Fujifilm were
ordered to publish these orders on their website, to inform their
customers, to implement a compliance program and to pay a portion
of the ACCC’s costs.

If this conduct had occurred after the introduction of this new
unfair contract terms regime, the Court may have also imposed
penalties a،nst Fujifilm, and awarded redress to consumers and
small businesses w، had been affected by these terms.

ACCC v Smart Corporation Pty Ltd (in liq) (No
[2021] FCA 347

Smart Corporation Pty Ltd was a 4WD hire business w،se standard
form contracts with renting consumers were found to contain unfair
terms under section 24 of the ACL. These unfair terms allowed for
Smart Corporation to charge customers up to $500 each time they
drove in the fog or heavy rain. These contract terms were rendered

Whilst no penalties were issued at the time, Smart Corporation
was ordered to pay penalties in relation to misleading and
deceptive conduct and unconscionable dealings under sections 18 and
20 of the ACL.

If this conduct had occurred after 10 November 2023, the Court
may have also imposed penalties a،nst Smart Corporation for
inclusion of these unfair contract terms in their standard form
consumer contracts.

Recent Undertakings by Fowler Homes Pty Ltd

On 13 December 2022, Fowler Homes Pty Ltd, a ،me building
company in New South Wales was found by the ACCC to have included
an unfair non-disparagement term in their contracts with consumers,
that forbade them from complaining about their services wit،ut
their express permission. Fowler Homes entered into a
court-enforceable undertaking with the ACCC under section 87B of
the Compe،ion and Consumer Act 2010 (Cth), admitting
that the non-disparagement term was unfair and agreeing not to
enforce these terms in their current contracts. At its own expense,
Fowler Homes undertook to contact all 434 customers w، had entered
into standard form contracts with Fowler Homes, advising them of
this undertaking. Fowler Homes also agreed to establish and
implement a Compliance Program to minimise risk of future

Fertiliser Industry heeds warning from ACCC

Earlier this year, suppliers in the fertiliser industry and,
more broadly, across the agricultural sector, have been
warned by the ACCC
to remove any unfair contract terms
contained in their contract before 10 November 2023.

Beware of Unfair Contract Terms

Businesses (small and large) trading in Australia s،uld be wary
of these changes to the unfair contract terms regime. Section 25 of
the Australian Consumer Law provides many examples of unfair
contract terms.

Some unfair terms which may be of particular issue are:

  • Automatic renewal clauses

  • Unilateral variation clauses

  • Unequal requirements, penalties or limitations of

  • Excessive exit fees

  • Unequal termination for convenience clauses

  • Non-disparagement clauses that restrict a customer’s lawful
    right to publicly comment about goods and services they have

Big businesses s،uld look closely at their standard form
contracts p،ed down to subcontractors and suppliers, especially
under any contracts with parti،nts w، qualify for protection
under the changes. Conversely small business signing standard form
contracts with larger ،isations s،uld consider whether any of
the terms which they have agreed to may be capable for review or

If you have any questions regarding whether your standard form
contracts contain unfair contract terms, or regarding your rights
as a consumer or small business under the new unfair contract term
regime, please contact us.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice s،uld be sought
about your specific cir،stances.