Unfair Contract Terms Lawyers — Part 2-3 ACL — Consumers & Small Business
Unfair Contract Terms Lawyers — Standard Form Contracts. Void Terms. Civil Penalties.
Since November 2023, unfair terms in standard form consumer and small business contracts are not just void — they attract civil penalties of up to $50 million per contravention for corporations. The UCT regime covers gym memberships, telco contracts, insurance policies, software licences, franchise agreements, and almost any other standard form contract. A consumer law lawyer advises on whether a term is unfair and seeks to have it declared void.
⚠ Since 9 November 2023, unfair contract terms attract civil penalties — not just voidance. Businesses using standard form contracts should audit their terms immediately. Consumers bound by unfair terms can apply to court to have them declared void. Get UCT advice now.
Unfair Contract Terms Law
The UCT regime under Part 2-3 ACL — the three-limb test
The unfair contract terms regime in Part 2-3 of the ACL (ss 23–28) applies to standard form contracts that are consumer contracts or small business contracts. A term of such a contract is unfair if it satisfies all three limbs of the test in s 24(1): (1) it would cause a significant imbalance in the parties' rights and obligations under the contract; (2) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and (3) it would cause detriment (financial or otherwise) to a party if applied or relied on.
The court must also take into account the contract as a whole (s 24(2)) — a term that appears unfair in isolation may be balanced by other terms that favour the consumer or small business. The onus of proving that a term is reasonably necessary to protect the legitimate interests of the advantaged party lies on that party (s 24(3)).
Standard form contracts are contracts prepared by one party where the other party had no real opportunity to negotiate the terms — the "take it or leave it" contracts common in consumer and small business settings. Section 27 ACL lists the factors a court may consider in determining whether a contract is standard form, including whether one party had all the bargaining power and whether there was a genuine opportunity to negotiate the terms.
Small business contracts (from 9 November 2023): the UCT regime now covers all standard form contracts where at least one party is a "small business" — defined as a business with fewer than 100 employees (headcount) or annual turnover under $10 million. The previous contract value threshold ($300,000, or $1 million for contracts of 12+ months) has been removed, significantly expanding the regime's coverage.
The civil penalty provisions (ss 76 and 224 ACL) now apply to UCT contraventions — up to $50 million (or 3 times the value of the benefit obtained, or 30% of adjusted turnover, whichever is greater) for corporations, and $2.5 million for individuals per contravention. Each unfair term in each contract may be a separate contravention.
UCT Matters
Unfair contract terms matters we handle
Unilateral variation clauses
Terms allowing the supplier to unilaterally vary the price, services, or other key terms without the consumer's consent — consistently identified by courts and the ACCC as unfair.
Automatic renewal clauses
Terms that automatically renew a contract for a further period without adequate notice to the consumer — common in subscription services, gym memberships, and professional service agreements.
Broad termination rights
Terms allowing the supplier to terminate the contract for a wide range of reasons without compensating the consumer — while denying the consumer equivalent termination rights.
Liability limitation clauses
Terms that broadly limit the supplier's liability for defective goods or services to a refund of the purchase price — even where the consumer has suffered significant consequential losses.
Broad indemnity clauses
Terms requiring the consumer or small business to indemnify the supplier for losses arising from the supplier's own negligence or breach of contract.
Entire agreement clauses
Terms purporting to exclude all pre-contractual representations and warranties — which may also breach s 18 ACL (misleading conduct) if representations were made during negotiations that induced the contract.
Frequently Asked Questions
Unfair contract terms questions answered
What happens if a court finds a term is unfair under the ACL?
Under s 23(1) ACL, an unfair term is void — it has no legal effect. The contract continues without the unfair term (s 23(2)). Since 9 November 2023, the party who included the unfair term is also exposed to civil penalties — up to $50 million per contravention for corporations. The court may also order injunctions, compensation, and other appropriate relief.
Does the UCT regime apply to franchise agreements?
Yes — franchise agreements are typically standard form contracts, and franchisees are often small businesses within the Part 2-3 ACL definition. Many common franchise terms — unilateral variation clauses, broad termination rights, territory restrictions — have been scrutinised for UCT compliance. The ACCC has specifically highlighted franchise agreements as a UCT compliance focus area.
Can a business defend an unfair term by arguing it is standard in the industry?
No — industry standard practice is not a defence to a UCT claim. The court applies the three-limb test in s 24 ACL objectively — whether the term causes a significant imbalance, whether it is reasonably necessary to protect legitimate interests, and whether it causes detriment. The courts have consistently rejected "industry standard" arguments as a justification for unfair terms.