Unfair contract terms

Australian Consumer Law has a national unfair contract term that protects consumers by removing unfair terms in standard form consumer contracts. The law applies to new contracts entered into on, or after 1 July 2010 and terms of existing contracts renewed or varied on or after 1 July 2010.

What type of contracts does the law apply to?

The law applies to standard form consumer contracts for the supply of goods and services, or for the sale or grant of an interest in land, to an individual for personal, domestic or household use.

Most insurance contracts are not covered. Go to the contracts page on our website for more information.

Standard form contracts

Generally, a standard form contract:

  • is prepared by the business
  • contains a set of generic terms and conditions
  • is not negotiated between parties
  • is presented on a 'take it or leave it' basis.

You enter standard form contracts all the time - typically for home loans, credit cards, mobile phones, gym memberships, travel and health insurance and utilities.

Are there contract terms excluded from the laws?

The law does not apply to:

  • terms that describe the goods, services or land that you’ve agreed to buy
  • terms that set the upfront price payable under the contract, provided the price is disclosed before the contract is entered into
  • terms that are required or permitted by law as a matter of public policy.

When is a term unfair?

Under the provisions, a term is unfair if these three conditions are met:

  • if the contract term is one-sided and greatly favours the business over the consumer, and
  • there is no satisfactory commercial reason why the business needs such a term, and
  • the consumer will suffer financial loss, inconvenience or other disadvantage if the term is enforced, then it may be unfair.

What types of terms might be unfair?

The law contains a list of the types of terms that may be considered unfair. Contracts can still include these terms, as they are not banned, but if used in certain circumstances they can be unfair:

  • Terms that allow the business to make unilateral changes to important aspects of the contract, such as increasing charges or varying the type of product to be supplied, with no right for the consumer to cancel the contract without penalty
  • Terms that avoid, limit, or restrict the liability of a supplier, its employees or agents for a breach of the contract
  • Terms that require consumers who breach the contract or end it early to pay an excessive amount in compensation or cancellation charges.

Who decides if a term is unfair?

Only a court or the NSW Civil and Administrative Tribunal can decide if a term is unfair.

The court or Tribunal must consider:

  • whether the term meets the three tests of unfairness
  • how the term was expressed in the contract. For example, it may be hidden in fine print or written in legalese.
  • the contract as a whole. A term that seems unfair may be reasonable if it is balanced by other terms offering benefits such as lower prices.

What happens to a contract that contains an unfair term?

If a court or Tribunal finds that a term is unfair, it is void. The term is treated as if it never existed and cannot be enforced or relied on. If the unfair term is removed, the contract still stands.

What can I do if I think a contract term is unfair?

If you think a term in your contract is unfair, you should first try to resolve the issue with the business.

NSW Fair Trading, the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission can give you general information on the way the unfair contract terms law works.

If you’re not able to resolve a dispute directly with the business, lodge a complaint with NSW Fair Trading.

If the dispute is still not resolved, you might be able to make an application to the NSW Civil and Administrative Tribunal.

You can apply to the Supreme Court for a declaration that a contract term is unfair. You should get legal advice if considering this option.

What is the effect of a declaration?

A declaration binds all parties to consumer contracts, unless the Supreme Court orders otherwise.

A declared unfair term is void. A business who tries to enforce a declared unfair term against a consumer, is in breach of the Fair Trading Act. NSW Fair Trading can then apply to the Supreme Court for:

  • an order to provide redress to consumers
  • an injunction, or
  • any other order the Court sees fit to make.

Who will enforce the law?

The following agencies will enforce provisions relating to consumer goods and services:

  • Australian Competition and Consumer Commission (ACCC)
  • NSW Fair Trading, and
  • other State and Territory consumer protection agencies.

The Australian Securities and Investments Commission (ASIC) will enforce provisions relating to financial products and services.

Who should I contact for complaints or enquiries?

For complaints and enquiries on consumer goods and services, contact:

NSW Fair Trading

Tel: 13 32 20
Website: www.fairtrading.nsw.gov.au


Tel: Infocentre 1300 302 502
Website: www.accc.gov.au
In writing to the ACCC office in your State or Territory.


Tel: 1300 300 630
Website: www.asic.gov.au