Can you be fined for an unfair contract term?

Yes. Since 9 November 2023 it has been against the law to propose, use or rely on an unfair term in a standard form contract with a consumer or a small business. Before that date a court could strike the term out and nothing more. The maximum penalty for a company is now $100 million.

Most owners meet this law from the wrong side. They read about it as protection from a big supplier. It is also pointed at the contract sitting in their own quote folder.

What an unfair term actually is

There is a test, and it has three parts. All three have to be met.

A term is unfair if it causes a significant imbalance in the rights and obligations of the parties, it is not reasonably necessary to protect the legitimate interests of whoever benefits from it, and it would cause financial or other harm to the other side if it were enforced.

Read the middle limb again, because it is the one that decides most arguments. You are allowed to protect yourself. You are not allowed to protect yourself further than the risk requires.

The ACCC gives examples of terms that may be unfair. They share a shape: one side can do something the other side cannot.

• Avoid or limit their obligations under the contract

• End the contract

• Penalise the other party for breaching or ending it

• Change the terms after it is signed

None of those is automatically unfair. A one-sided variation clause in a twelve-month service agreement is a very different thing from the same clause in a two-week job. Context does the work.

What this means for your business

Here is the part most owners have backwards.

This law does not only apply to the terms you receive. It applies to the terms you send.

If you email the same service agreement to every customer, that agreement is yours, and the exposure attaches to you. The supplier relationship you were worried about runs in both directions, and you are the supplier in one of them.

Think about what you actually issue. Quote terms on the back page. A standing supply agreement. Your terms of trade. A subcontractor agreement you wrote once in 2019 and have sent out 400 times since. Each of those is a standard form contract if the person receiving it could only sign or walk away.

And the exposure is not theoretical any more. It used to be that the worst case was a clause that stopped working. Now the worst case has a number attached.

Where it comes from, and when it applies

The rules sit in the Australian Consumer Law, which is Schedule 2 to the Competition and Consumer Act 2010 (Cth). They have been there since 2010 for consumers and since 2016 for small business.

What changed was the consequence.

Before 9 November 2023, a court could declare a term unfair, and the term became void. There was no penalty. A business could include an aggressive clause, rely on it for years, and lose nothing but that clause if anyone ever challenged it.

From 9 November 2023, proposing, using or relying on an unfair term is banned and penalties apply. The clause is still void. It is now also a contravention.

Two other things changed on the same day, and both widen who is covered.

The contract value threshold went. The protections apply irrespective of the value of the contract. A $900 job is in scope.

The small business test got bigger. It moved from 20 employees to the current test below.

Which of your customers are protected

This is the line to check first, because it decides whether any of the rest applies to you.

A business is a protected small business if it has fewer than 100 employees, or makes less than $10 million in annual turnover.

Or. Not and.

That single word catches people. You do not get to pick the limb that suits you — the other side only has to clear one.

In practice, most Australian businesses you send terms to will be protected. The ACCC's own guidance says businesses using standard form contracts should make enquiries to work out whether their customers fall under these thresholds. That is a polite way of saying the obligation to know is yours.

Is your contract a "standard form" contract?

Almost certainly yes, and the name on the document has nothing to do with it.

A court looks at how the contract came to exist. It considers whether one party had all or most of the bargaining power, whether the contract was prepared before any discussion between the parties, whether the other side could effectively only accept or reject it as presented, and whether the same or similar contract is used repeatedly.

That describes nearly every set of terms a small business issues. You wrote it once. You send it unchanged. The customer signs it or they don't.

Being willing to negotiate is not the same as negotiating. If you would have changed a clause had anyone asked, but nobody ever asks and nothing ever changes, the contract still looks standard form from the outside.

What's changed — and what it costs now

The maximum penalties moved again this year, and they moved up.

For a contravention on or after 28 March 2026, the maximum penalty for a body corporate is the greater of three figures: $100 million, three times the value of the benefit obtained if the court can work that value out, or 30% of adjusted turnover during the breach turnover period. For an individual it is $2.5 million.

Before 28 March 2026 the corporate maximum was $50 million. Conduct is judged against the penalties in force when it happened, so the date the term was used matters.

A warning on the numbers. Some government pages still carry the old $50 million figure, because they were written before the change and have not been revisited. The ACCC's own 2022 media release announcing the penalty regime is one of them. Check the date on any page you take a number from.

These are maximums, not tariffs. A court sets the penalty on the facts, and a small business issuing one loose clause is not the case those ceilings were written for. The point of the ceiling is that there now is one.

What happens when a term is found unfair

Two separate things happen, and it is worth keeping them apart.

The term goes. It is void, which means it does not bind either party. The rest of the contract continues to bind you both, so far as it can operate without the term that came out.

That second half is the quiet risk. Pull an indemnity out of an agreement built around it and what is left may not protect you at all. You do not get a replacement clause. You get a gap.

Then the orders. A court can grant an injunction stopping you acting on the term, award compensation, order redress for consumers or small businesses who were not even parties to the case, and make any other order it thinks appropriate.

Read that third one slowly. Redress can reach people who never went to court. If the same clause sits in every contract you have issued, the remedy can reach every one of them.

How to protect your business

Four checks, and you can do the first three yourself this week.

1. Find every set of terms you issue. Not just the one your lawyer drafted. The quote template, the terms on the website, the subcontractor agreement, the purchase order conditions. Anything you send more than once is in scope.

2. Read every clause in one direction, then the other. Take each right you have given yourself and ask whether the customer has the mirror of it. Can you vary the price without notice? Can they? Can you terminate for convenience? Can they? One-sidedness is not fatal on its own, but it is where a court starts looking.

3. For every one-sided clause, write down why. One line each. If you cannot say what legitimate interest the clause protects, and why a narrower version would not do the job, that is your answer. The test asks whether the term is reasonably necessary, and the burden of showing that sits with the party relying on it.

4. Date-stamp the review. Note when you last checked the terms and against what. If the clause was used before 28 March 2026, the older penalty maximum applies to that conduct, and knowing when you changed what is how you show it.

Best case: what a fair version of the same clause looks like

The gap is usually narrower than owners expect. Same protection, less reach.

The version that invites a challenge:

The Supplier may vary these terms at any time by notice to the Customer. Continued use of the services constitutes acceptance.

One side can change the deal. The other side finds out afterwards. There is no limit on what can change and no way out.

The version built on the same interest:

We may change these terms on 30 days' written notice. If a change materially disadvantages you, you may end this agreement within that 30 days at no cost and we will refund any fees paid for services not yet delivered.

The commercial need is the same — terms that can move with costs and the law. But the change is capped by notice, the customer can leave, and leaving does not cost them money they have already paid.

Nobody can promise you a clause will survive. What you can do is write one where the answer to "why is this here" is a sentence, not a shrug. If you would rather not read your own terms line by line, have the contract checked against the Act that governs it and start from what comes back.

When to call a lawyer

Three situations where a self-review will not get you there.

You have had a complaint, or a regulator has been in touch. That is live, and what you say early shapes everything after it.

Your terms are the product. Franchise agreements, licensing, long-term supply arrangements with lock-ins. The clauses are load-bearing, and a court pulling one out can take the commercial model with it.

You sell financial products or services. That is a different regulator and a different Act. See below.

What this doesn't cover

Financial products and financial services, where the unfair contract terms rules are enforced by ASIC under section 12BF of the ASIC Act 2001, and where an extra $5 million upfront price cap applies to financial product contracts. Contracts that are individually negotiated, which are outside the standard form rules entirely. And whether each unfair term in one contract is counted as a separate contravention — we could not confirm that on a government source, so we have not assumed it either way.

Verified 15 September 2026, against the unfair contract terms and fines and penalties pages on accc.gov.au, the small business toolkit on accc.gov.au, the unfair contract term protections page on asic.gov.au, and the Competition and Consumer Act 2010 compilation on legislation.gov.au.

Your terms of trade are a contract you wrote, and nobody has read since. Upload the standard form agreement you send today. Every clause is scored, the one-sided ones are named, and a version that keeps the protection without the reach comes back beside it.