Are you breaching unfair contract laws?

If your business uses standard form contracts such as terms of trade, service agreements, leases, franchise agreements, or supplier T&Cs, it’s time to take a closer look at the unfair contract terms.

A standard form contract is a template agreement that a business uses repeatedly. They are often presented on a “take it or leave it” basis where the customer has little scope to negotiate its terms.

In 2023, changes to Australia’s Unfair Contract Terms laws came into effect under the Australian Consumer Law.

The Australian Consumer Law has rules governing unfair contract terms. Currently, provisions in some standard form contracts can be deemed void if they were found to be unfair.

A term will be unfair if:

It causes significant imbalance in the parties’ rights and obligations;
It is not reasonably necessary to protect the legitimate interests of the party advantaged by the term; and
It would cause detriment to the other party if it was enforced.

Examples might include unilateral rights to vary or terminate a contract, or terms which impose unfair fees.

Even if your contracts have remained unchanged for years, they could now expose your business to serious legal and financial risk.

Here are five common contract types that may include unfair terms, and how to stay compliant.

1. Customer terms and conditions

Watch out for contract clauses that:

Let you change prices or product features individually, without the customer’s agreement
Exclude all liability, even for your own negligence
Automatically renew contracts while making it hard or costly for customers to exit

Here’s an example…

An online retailer’s terms state: “We may change the price of products and services at any time, even after you have placed an order and made payment.”

Why is this a problem?

It causes significant imbalance in the parties’ rights and obligations. The customers are locked in, while the retailer can still change the deal.

To stay compliant, you should use fixed pricing at the time of contract. If you need flexibility, ensure any pricing changes are reasonable and fully disclosed.

2. Supplier agreements

Watch out for clauses that:

Allow you to change terms like pricing or delivery times without supplier approval
Require broad compensation for things outside the supplier’s control
Permit termination without cause or compensation

Here’s an example…

A cleaning contract states: “We may terminate this agreement at any time, for any reason, with immediate effect. The supplier is not entitled to any compensation.”

This type of clause gives one party all the power and leaves the other with all the risk, going against the new laws and causing an imbalance between the parties involved.

To avoid dispute, always ensure termination rights are mutual, or at least include fair notice and compensation terms where appropriate.

3. Service contracts

Watch out for clauses that:

Let you increase fees and apply changes to current services
Impose penalties for early termination that are excessive or arbitrary
Prevent customers from seeking solutions for poor service

Here’s an example…

A digital agency’s contract says: “Fees may be increased at our sole discretion and can be applied to current services without notice.”

This creates uncertainty for clients and allows one-sided changes, signaling that there may be an unfair term lurking.

How can you eliminate unfair terms?

Introduce clear, objective pricing mechanisms such as Consumer Price Index (CPI)-linked increases or fixed review periods with notice requirements.

4. Commercial Leases

Watch out for clauses that:

Let the landlord terminate without cause, while offering no similar rights to the tenant
Shift all risk and liability to the tenant, regardless of fault
Allow rule changes or restricted access without notice

Here’s an example…

A lease includes: “The landlord may change the rules of the building, including restricting access, at any time without informing the tenant.”

Why is this a problem?

It gives the landlord unchecked control, leaving the tenant stranded and uninformed. This causes an imbalance in the rights’ of both parties.

5. Franchise agreements

Watch out for clauses that:

Allow unilateral changes to fees, territories, or key operational terms
Restrict the franchisee’s legal rights without similar limits on the franchisor
Impose post-termination restraints that are overly broad

Here’s an example…

A franchise agreement states: “We may change your territory boundaries or introduce new fees at any time, with or without notice. You may not terminate the agreement as a result.”

This example breaches the Australia’s Unfair Contract Terms laws as the franchisees have no right to exit if the agreement changes.

If changes are needed, you should always include a fair process, minimum notice periods, and an opportunity for both parties to renegotiate or terminate.

Why This Matters

Under the revised regime:

Unfair contract terms are now illegal (not just unenforceable)
Penalties can apply to each unfair clause in each contract
The laws cover standard form contracts with consumers and small businesses (defined as having fewer than 100 employees or under $10 million in annual turnover)

How to Protect Your Business

Review your standard contracts, especially customer-facing terms, supplier deals, leases, and franchise/licensing agreements
Identify one-sided clauses, such as unilateral variation rights, harsh termination provisions, or unreasonable exclusions of liability
Replace or reword risky terms to create clear, fair, and transparent agreements
Consult legal experts to ensure you’re complying with the new laws

Don’t wait for a dispute or regulatory notice to uncover an unfair term in your standard form contracts.

If your business uses standard form contracts, you should review them immediately for unfair terms.

Aintree Group Legal will be happy to discuss this with you, so don’t hesitate to contact us today if you believe this will impact you!

This is general advice only and has not been prepared with your situation and needs in mind. For individual and personalised advice, we highly recommend that you seek out proper professional advice from your lawyer.