What Every Small Business Needs to Know About Unfair Contract Terms

If you run a small business (or have a client that does) your rights and actions are protected by Australian Consumer Law and, more broadly, under the Competition and Consumer Act 2010.

The legislation covers things like the repair, replacement or refund of business purchases, supplier refusal to supply goods or services, business behaviours that limit competition, false or misleading claims and so on.

It’s important that all business owners have a good understanding of what a standard form contract is and how you can protect your business from the ramifications of unfair contract terms.

What Are Unfair Contract Terms?

Unfair contract terms are clauses in standard form contracts that create a significant imbalance between the parties, are not reasonably necessary to protect legitimate business interests, and would cause harm or detriment if relied upon.

Who is Protected?

Australia’s unfair contract terms regime applies to “standard form contracts” involving small businesses and consumers.

As of 9 November 2023, a contract is a “small business contract” if at least one party:

• Employs fewer than 100 people (including casuals employed on a regular and systematic basis), or
• Has an annual turnover of less than $10 million

What is a Standard Form Contract?

A contract is likely to be “standard form” if:

1. It is offered on a “take it or leave it” basis, with little or no opportunity to negotiate
2. One party prepares the contract in advance, with little scope for changes

Examples include supply agreements, service contracts, franchise agreements, software licences, leases, utilities, and finance contracts.

What Makes a Contract Term Unfair?

A court or tribunal may declare a term “unfair” if:

• There is a significant imbalance in rights and obligations under the contract;
• The term is not necessary to protect legitimate business interests; and
• The term would cause detriment (financial or otherwise) to the other party if relied upon.

Examples include:

• Allowing one party (but not the other) to terminate at any time
• Unilateral variation of contract terms
• Penalising one party for breach but not the other
• Limiting one party’s rights to sue or make a claim

What Has Changed Since 2023?

The 2023 and 2024 reforms introduced significant changes:

• Broader coverage: The regime covers many more businesses (fewer than 100 employees or <$10 million turnover).
• Abolishment of contract value limits: Applies regardless of contract price/term.
• New penalties: Courts can now impose substantial civil penalties for proposing, using, or relying on unfair contract terms. This is a major shift. Previously, only the offending clause was void—now, businesses face real financial and reputational risk.
• Enforcement powers: The ACCC and ASIC have new powers and have already taken action under the new laws. Businesses cannot simply “take a chance” with standard form contracts.

What Happens if a Term is Unfair?

• Only a court or tribunal can declare a term unfair.
• If found, the term is void and unenforceable—but the rest of the contract remains.
• Parties harmed may seek compensation.
• Now, regulators can also pursue financial penalties and other orders against the business using or proposing the unfair terms.

How Can You Protect Your Business?

If you’re a small business:

• Review all standard form contracts you receive. Question any terms that seem one-sided or unreasonable.
• Seek advice before signing.

If you supply goods or services, or are a franchisor/franchisee:

• Carefully review your contract templates.
• Remove or reword unfair terms.
• Give counterparties the opportunity to negotiate and plenty of time to read and consider the contract.
• Ensure your contract is written in plain, transparent English.

The risks for getting it wrong are now much higher. Investing in professional legal review is more important than ever.

Visit the ACCC website on Unfair Contract Terms , or contact the BlueRock team to speak with a contract specialist who can ensure your documentation is compliant and protects both your business and your reputation.

Need Help?

BlueRock’s team of legal and business specialists are on hand to review your contracts, advise on compliance, and help negotiate fairer terms. Reach out today for advice tailored to your business needs.