Unfair Contract Terms

The new unfair contract terms laws come into effect on 9 November 2023.

The new laws –

1. Introduce civil penalties for organisations that include or who rely upon unfair contract terms in their standard form contracts with consumers and small businesses;
2. Expand the coverage of the unfair contract terms regime to more small business contracts.
3. Significantly increases the maximum penalties which apply to contraventions of the CCA more generally.

The new maximum penalties apply to unfair contract terms, amongst other things, and can include penalties of up to $50 million or higher depending on the value of the contract or the annual turnover of the business.

What contracts does this apply to?

The new laws apply to standard form consumer contracts. It may apply to your terms and conditions on quotes, special conditions included in your MBA or other building contracts as well as purchase orders where these documents form part of your contract. In deciding what a standard form contract is, a court will consider whether:

• the party that prepared the contract has all or most of the bargaining power in the transaction
• the contract was prepared without or before any discussion between the parties about the transaction
• the other party could only either accept or reject the terms of the contract as presented
• the other party was given any real opportunity to discuss the terms of the contract
• the terms of the contract consider any specific features of the other party or the transaction.

Because the starting point is that every contract is a standard form contract, members are encouraged to review their specific contracts and any special conditions they include to understand whether their contract is a standard form contract and if it contains any unfair contract terms.

What is an unfair contract term?

A contract term is unfair if it:

• gives one party a significant advantage over the other
• is not necessary to protect the legitimate interests of the party with the advantage, and
• would cause financial or other harm to the other party if enforced.

What are some examples of unfair contract terms?

The ACCC gives the following examples of unfair contract terms:

• terms that allow one party (but not the other) to avoid or limit their responsibilities under the contract
• terms that allow one party (but not the other) to end the contract
• terms that penalise one party (but not the other) for breaking or ending the contract
• terms that allow one party (but not the other) to change the terms of the contract.

If you are using your own special conditions or a non-MBA contract, we suggest having your contract reviewed prior to 9 November 2023.  If you would like to discuss unfair contract terms or are interested in reviewing any of your contracts, please contact our member services team on 6175 5900.