The national unfair contract terms law, effective as of 1 July 2010, aims to protect consumers from unfair terms in standard form consumer contracts. It is one of the most important consumer reforms in the new Australian Consumer Law.

The Australian Consumer Law is a Schedule to the Trade Practices Act. At present, the unfair contract terms provisions are the only clauses in the Schedule. 

The Fair Trading Amendment (Unfair Contract Terms) Act amends the Fair Trading Act by inserting the unfair contract terms provisions so that they operate as New South Wales law.

The Act applies to new contracts entered into on or after 1 July 2010, and existing contracts if the terms are renewed or varied from 1 July 2010.

An unfair term in a standard form consumer contract is void, although the contract continues to bind the parties if it is capable of operating without the unfair term.

A consumer contract is a contract for the supply of goods or services, or a sale or grant of an interest in land, to an individual for personal, domestic or household use. A standard form contract is not defined, but generally a pre-prepared contract that is not negotiated or is offered on a 'take it or leave it' basis is taken to be standard form, unless the business proves otherwise.

Only a court or the Consumer, Trader and Tenancy Tribunal can find a term unfair, if it meets three tests:

• it would cause a significant imbalance in the parties’ rights and obligations arising under the contract, and
• it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, and
• it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

The court or Tribunal must also consider the contract as a whole, and how clear and conspicuous the term is.

The Act does not apply to terms that:

• describe the goods, services or land the consumer has agreed to buy
• disclose the upfront price the consumer has agreed to pay
• are required or permitted by Commonwealth, State or Territory law.

The Act contains a list of 14 examples of the kinds of terms that may be unfair.

The Director-General may apply to the Supreme Court for an order declaring a term of a contract to be unfair and the declaration can bind all parties to contracts of that kind.

It is a contravention of the Act, but not a criminal offence, if a business seeks to apply or rely on a declared unfair term, and the Director-General may apply to the Court for remedies (such as an injunction or orders for compensation).

A consumer can also apply to the Supreme Court for a declaration, but only with the leave of the Court.

A consumer may bring proceedings in a court or Tribunal of competent jurisdiction in relation to an unfair contract term.

The Contracts Review Act 1980 is not limited or restricted by, and does not limit or restrict the operation of, the unfair contract terms provisions of the Fair Trading Act.