It has been two years since Australia’s unfair contract terms regime was implemented, boosting legal protections for small businesses and individuals. With the new laws now tested in the Courts, Charles Lethbridge, Commercial Litigation Partner, takes a deep dive into the changes, why they are necessary and what enforcement has followed.
Unfortunately, Australia has a history of large corporations taking advantage of consumers. One need only watch the nightly news to see another investigation from the Australian Competition and Consumer Commission (ACCC) into suspected corporate wrongdoing making headlines.
In many cases, especially when it comes to standard form contracts, consumers have little to no bargaining power. There is often a lack of transparency among big corporations, which rely on the complexity and length of their contracts to discourage customers from thoroughly reading or understanding the terms.
To address this imbalance, the Australian Consumer Law (ACL) was amended in November 2023, introducing much-needed protections for small businesses and individuals who have been disadvantaged in their dealings with larger corporations.
Two years since the strengthened unfair contract terms regime came into effect, are the reforms making a difference?
The reforms were designed to boost consumer protection and ensure that businesses do not impose terms that are disproportionately detrimental to consumers, with substantial penalties for businesses that breach the law.
Early enforcement actions are now emerging, showing that regulators are beginning to test the boundaries of what constitutes an unfair term and holding businesses accountable.
What are unfair contract terms?
Under the ACL, a contract term may be considered unfair if:
- It causes a significant imbalance between the rights and obligations of the parties,
- The term is not necessary for protecting the advantaged party, or
- It causes detriment (whether financial or otherwise) to a party if enforced.
Unfair terms take advantage of a consumer’s or small business’s lack of bargaining power, often found in standard form contracts. These contracts are typically take-it-or-leave-it agreements, with little room for negotiation.
Examples of such terms might include automatic renewals, penalties for minor breaches, or clauses that allow businesses to unilaterally change terms without the consumer’s consent. One-sided liability provisions, unreasonable timeframes for claims and broad indemnities that protect only one party are other examples.
Unfair terms might allow builders to increase contract prices without notice, impose unreasonable time restrictions on claims, or – as we’ve seen in practice – give head contractors the right to take ownership of subcontractors’ tools and equipment.
In its explainer of the regime, ASIC uses the example of the financial services industry, saying that unfair terms may allow lenders to change loan conditions with minimal notice – such as five days – leaving borrowers without time to refinance or exit without a penalty. Similarly, insurers may reject legitimate claims by relying on terms that use outdated or overly restrictive medical definitions.
Regulators are taking action
In July 2024, the Federal Court found that global online payment system PayPal’s “fee error term” was unfair. The term required businesses to notify PayPal of errors or discrepancies in fees within 60 days. If the business missed that deadline, it would have to accept the disputed fees.
More recently in June 2025, the ACCC announced its first enforcement action under the expanded regime, against Mable Technologies Pty Ltd. The online platform connects clients with disabilities and those in aged care with independent support workers.
The company admitted to including multiple unfair contract terms in its standard form agreements between November 2023 and August 2024. These included provisions that allowed the company to impose minimum penalty fees of $5,000 on users, deem timesheets approved unless disputed within 24 hours, unilaterally change fees and terms without providing reasonable notice, and impose one-sided liability limitations and indemnities.
Although the ACCC could have imposed financial penalties, it instead entered into an agreement with Mable, under which the company ceased relying on its terms of use, amended them, and set up an ACL compliance program that the ACCC will monitor for three years.
The regulator has made clear that unfair contract terms are a key enforcement priority, so more cases could be on the horizon.
The Australian Securities and Investments Commission (ASIC) has also taken court action claiming that several HCF Life Insurance Company Pty Ltd. products contain unfair terms.
The game-changing reforms of 2023
Expanded protection for small businesses
Previously, unfair contract term protections only applied to businesses with fewer than 20 employees where the contract value was under $300,000 (or $1 million for contracts lasting more than a year).
Now, the protections extend to businesses with fewer than 100 employees or an annual turnover of less than $10 million, regardless of the contract’s value. This expansion has brought hundreds of thousands of additional businesses under the protective umbrella of the law.
Broader scope of contracts covered
A contract is now considered standard form even if the consumer negotiated minor changes, selected terms from pre-determined options, or negotiated terms of a separate, related contract. This closes loopholes that some businesses used to avoid the unfair terms regime.
Penalties that actually deter
Perhaps the most significant change is that unfair contract terms are now prohibited, rather than merely voidable. The maximum penalties are severe:
- For corporations: Up to $50 million, or three times the benefit obtained, or 30% of adjusted turnover during the breach period
- For individuals: Up to $2.5 million (increased from $500,000)
Critically, if a court finds multiple unfair terms within a contract, each term constitutes a separate breach, potentially exposing companies to multiple penalties.
Courts can strike down unfair terms
Courts now have clear authority to completely invalidate unfair contract terms, vary or refuse to enforce a contract, order injunctions, and award damages. When determining whether a term is unfair, courts consider the entire contract, the transparency of the term, the bargaining power of each party, and whether genuine negotiation occurred.
Looking ahead
Nearly two years have passed since the strengthened unfair contract terms regime commenced. With regulators actively pursuing enforcement cases and courts clarifying what constitutes unfairness, businesses can expect ongoing scrutiny of their contracting practices.
Transparency, fairness, and flexibility are no longer optional in Australian commercial contracts. They are legally required. In this vein, businesses that rely on standard form contracts should have reviewed their contracts carefully by now to identify any terms that may be considered unfair under the 2023 amendments.
Consumers and small businesses should know that they now have greater legal recourse when businesses attempt to use excessively one-sided terms. Transparency is a must, and regulators are actively enforcing the law.
If you believe a contract contains unfair terms, don’t assume that because a large company presented it, you must accept it.
Attwood Marshall Lawyers – experts in competition and consumer law
At Attwood Marshall Lawyers, our commercial litigation team has extensive experience in construction contracts, business disputes, and consumer law.
Whether you need to review your contracts to ensure compliance, negotiate fairer terms, or challenge unfair terms you’ve been presented with, we can help.
The team also has expertise in debt recovery, consumer and business disputes, insolvency, and class actions.
Please contact our Commercial Litigation Department Manager, Georgia Trapp on 07 5506 8278 or free call 1800 621 071 to find out where you stand.
