Unfair contract terms apply to business contracts here

In Australia, the unfair contract terms regime covers business-to-business standard form contracts, not just consumer ones. It has done since 9 November 2023, it carries civil penalties, and the same prohibition can be contravened more than once in a single contract.

This is one of the clearest differences between Australian law and the systems most contract software is built on.

What the law says

The regime sits in Part 2-3 of the Australian Consumer Law, in Schedule 2 to the Competition and Consumer Act 2010 (Cth), at ss 23 to 28A. It applies to a standard form contract where at least one party is a small business. Under the ACL test, that means fewer than 100 employees or turnover under $10m. There is no contract-value ceiling.

A term is unfair where it would cause a significant imbalance in the parties' rights, is not reasonably necessary to protect the interests of the party it advantages, and would cause detriment if relied on. Terms letting one party vary the contract unilaterally, terminate at will, or impose penalties on one side only are the usual candidates.

What makes the Australian position sharper than it first looks

Since 9 November 2023 the regime carries civil penalties. It used to be that an unfair term was simply void. Now proposing one is a contravention in its own right.

Proposing, using or relying on an unfair term is prohibited, and a prohibition can be contravened more than once within the same contract and in relation to the same term. A template with twelve problematic clauses, sent to fifty counterparties, is not one exposure.

And the maximum penalty for a body corporate doubled on 28 March 2026, under the Treasury Laws Amendment (Doubling Penalties for ACCC Enforcement) Act 2026. It is now the greater of $100 million, three times the value of the benefit obtained, or 30% of adjusted turnover during the breach period.

The part people get wrong

"Unfair contract terms is a consumer doctrine"

True in the United Kingdom, where the Consumer Rights Act 2015 confines it to consumers, and true under the EU directive. False in Australia since 2016 for small business contracts, and materially strengthened in 2023.

This is precisely why an offshore contract tool clears an Australian supplier agreement. Its rules say the doctrine stops at consumers, so a business-to-business standard form contract never gets tested against it. The clause passes. The exposure remains.

"We're the small business, so it protects us"

It may. But if your business is under 100 employees and you also issue standard form contracts, the regime applies to your contracts too. Being small does not exempt you from having unfair terms found in documents you send out.

"The maximum is $100 million, and we'll never get near that"

$100 million is the fixed figure in a formula, not a ceiling. The maximum is whichever is greater of that amount, three times the benefit obtained, or 30% of adjusted turnover.

"We only get in trouble if we rely on the term"

Proposing it already counts.

What it means for your contract

Standard form is the trigger, and most business templates are standard form. Prepared by one party, offered without meaningful negotiation, take-it-or-leave-it in practice.

The questions the law asks about each clause are these. Does it create a significant imbalance. Is it reasonably necessary to protect a legitimate interest. Would relying on it cause detriment. These are the clauses that draw attention:

• Unilateral variation: one party can change the terms without the other's agreement.

• One-sided termination: only one party can walk away, or walk away on shorter notice.

• Automatic renewal without notice: the term rolls over before the other party has a real chance to exit.

• Liability limits running one way: the drafting party caps its own exposure and leaves the other's uncapped.

• Indemnities running one way: the risk is pushed entirely onto the party who did not write the contract.

One further point catches Australian businesses out. A standalone mutual non-disclosure agreement may not engage the regime at all, because the ACL gateway requires a supply of goods or services, or a grant of an interest in land. There is no settled authority either way, so it should not be assumed in either direction.

Put a supplier agreement through Contractam and the terms likely to be unfair are named on both sides of the contract, not only the side you're on.

Check a supplier agreement →