Under Australian Consumer Law, certain unfair terms in standard form contracts are prohibited. This regulation applies when one party is a consumer or a small business, defined as employing fewer than 100 people or having an annual turnover below $10 million.

A standard form contract is typically pre-prepared, offering little to no room for negotiation. This includes various contracts such as terms and conditions of trade, standard terms, online terms, and written agreements.

Examples of Unfair Terms:

1. Automatic renewal terms without an easy opt-out option;
2. Terms allowing one party to make changes unilaterally;
3. Excessive termination fees;
4. Broad exclusions of liability for one party without reciprocal rights for the other.

Previously, courts could only declare an unfair contract term void and unenforceable. Now, they can impose significant penalties, including:

1. Fines up to $50 million for companies and $2.5 million for individuals per violation;
2. The greater of $2.5 million or three times the benefit obtained from the unfair term;
3. Personal liability for individuals involved in drafting or using the contract.

Beyond court-imposed penalties, having an unfair term can lead the other party to challenge their obligations or reduce their liability under the contract.

Businesses should review their terms of trade to ensure compliance and manage risks effectively.

For a confidential discussion about your business concerns, contact our Commercial and Corporate Law team at Mahons.

Addendum – ACCC Penalties Updated

Update: August 2026

Since this article was originally published, there has been a significant legislative change to the maximum penalties applicable to companies for certain competition and consumer law contraventions.

On 28 March 2026, the Treasury Laws Amendment (Doubling Penalties for ACCC Enforcement) Act 2026 commenced. The amendments doubled the first limb of the maximum penalty applicable to companies, increasing it from $50 million to $100 million.

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