Do the unfair contract terms rules protect you?

What changed

From 9 November 2023, the unfair contract terms regime in the Australian Consumer Law was significantly strengthened. Before that date an unfair term was simply void. Now, proposing, applying or relying on an unfair term in a standard form contract is a contravention that attracts civil penalties, and a court can make orders including injunctions and compensation.

Who is covered

The regime applies to consumer contracts and to small business contracts. A small business contract is one where at least one party is a business that employs fewer than 100 persons, or has an annual turnover of less than $10 million. The previous $300,000 and $1 million upfront price thresholds were removed, so contract value no longer limits the protection.

The test

A term is unfair if it would cause a significant imbalance in the parties' rights and obligations, is not reasonably necessary to protect the legitimate interests of the party advantaged by it, and would cause detriment if relied on. The contract must be standard form, meaning offered on a take-it-or-leave-it basis without effective negotiation.

What this means in practice

If you are the small business, a term you thought you were stuck with may be void and the other party may be exposed to a penalty for relying on it. Put the point in writing. A party that keeps relying on the term risks a penalty.

If you are the business issuing the contract, your standard terms are now a penalty risk. Terms drafted before November 2023 should be reviewed.