Unfair Contract Terms Changes: Does Your Business Have to Make Them? (10 Nov 23 Deadline!)

By Rachelle Hare, Managing Director of Blaze Business & Legal, 12 August 2023

Do the Unfair Contract Terms Changes apply to my business?

  • Applies to standard form contracts with consumers and small businesses.
  • Small business eligibility threshold increased to less than 100 employees or less than $10 million annual turnover. This is a massive change that means hundreds and thousands more businesses will qualify for the "small business" definition. There may even be unintended consequences (eg a Mining JV may end up being protected from Unfair Contract Terms if you, as Contractor or Subcontractor, use your standard terms for mining services).
  • Includes contracts related to financial products and services and real estate contracts.
  • Insurance contracts for consumers and small businesses are also covered.
  • Specific industries, such as construction and infrastructure, may be particularly exposed.

Which Unfair Contract Terms Changes are likely to affect my business?

  • Introduction of massive civil penalties for including Unfair Contract Terms in your standard form contracts.
  • Increased flexibility for courts in declaring a contract term unfair.
  • Expanded eligibility threshold for protections.
  • Removal of certain price thresholds for definition of small businesses, which increases protections.
  • Clarity around the definition of standard-form contract
  • Exemptions for certain clauses in contracts (eg clauses you are required to insert by law).

We're a small business - could we breach the Unfair Contract Terms requirements ourselves?

  • Small businesses are protected by AND subject to the same Unfair Contract Terms laws.
  • So if you're a small business, and you provide standard form contracts to consumers or other small businesses, you will likely be caught by the legislation.
Image of the map of Australia on top of a Contract, with the words "Unfair Contract Terms Changes" overlaid on the map. Blaze Business & Legal Logo.

Do I need to audit all my contracts?

  • If you provide standard form contracts to small businesses or consumers, you need to take action BEFORE 10 November 2023.
  • Review of your standard form contracts is essential - there are dozens of clauses that could be considered an Unfair Contract Term.
  • Legal advice may be needed for the various assessments that have to be made - Rachelle Hare can help you with this as well as advising generally.
  • Non-compliance can lead to legal and reputational risks.
  • Plus MASSIVE potential penalties (think minimum $50 million per Unfair Contract Term)!!!

Is there any deadline to make Unfair Contract Terms Changes?

  • The changes will commence on 10 November 2023.
  • We expect penalties to be enforced strictly from this time (because there has been a long notice period).
  • The 12-month grace period after Royal Assent for separate prohibitions and penalties will expire on 10 November 2023.
  • Timely review and amendment of contracts are crucial.

How do I tell if my Business has Standard Form Contracts?

  • Standard form contracts are typically pre-prepared by one party.
  • Offered on a 'take it or leave it' basis.
  • Changes aim to clarify the definition, including minor changes or term selection.
  • Review of contracts with legal guidance may be necessary.
  • Basically, if you have a template contract that you use often, this could be considered a standard form contract.
Infographic - Do the Unfair Contract Terms Changes apply to my Business? Blaze Business & Legal Logo.

What type of Contracts are likely to be caught by the Unfair Contract Term Changes?

  1. Construction Contracts and Works Contracts - Certain terms within Construction Contracts and Works Contracts may be deemed unfair.
  2. Contracts between head contractors and subcontractors - These subcontracts may contain terms that are considered unfair.
  3. Terms of trade and invoicing payment terms - Specific payment terms might be considered unfair if they cause significant imbalance or are not necessary to protect legitimate interests.
  4. Agreements for the supply of ancillary services - This includes contracts for services like cleaning, maintenance, marketing agencies, accounting services, travel services, transport, and logistics services.
  5. Financial Services Contracts - including for loan documents from banks.
  6. Retail leases - Certain clauses within retail leases may be considered unfair.
  7. Business loan agreements - Specific terms within business loan agreements may be deemed unfair.
  8. Software User Agreements - Agreements for cloud or web-based services or other software may contain unfair terms.

What clauses in my Standard Form Contracts are likely to be considered Unfair Contract Terms?

  • Terms creating significant imbalance between parties.
  • Specific terms in the standard form contract that create imbalance or are unnecessary may be considered to be Unfair Contract Terms.
  • Terms not reasonably necessary to protect legitimate interests.
  • Clauses that could cause financial or other detriment.
  • Terms allowing one party to limit performance, terminate, penalise, renew, or vary the contract.
  • Broad indemnities or exclusions of all liability may be considered unfair.
Table showing Clauses Likely to be Unfair Contract Terms. Blaze Business & Legal Logo.
Table showing Clauses Likely to be Unfair Contract Terms (part 2). Blaze Business & Legal Logo.

Read more about the upcoming penalties and amendments you should make to your contracts in our post on how to ensure your business is protected from the Unfair Contract Terms November 2023.

Are the Unfair Contract Terms Changes likely to be enforced?

  • The Unfair Contract Terms Changes are backed by legislation and enforced by courts and regulators.
  • ACCC, ASIC, and State and Territory regulators will be involved in enforcement.
  • Specific industries and sectors may face targeted scrutiny.
  • We think there will be rigorous enforcement from 10 November 2023.

If I have Unfair Contract Terms in my Standard Form Contracts for my business, what should I do?

  • Review your standard form contracts for Unfair Contract Terms (you will need a Commercial Lawyer like Rachelle Hare to advise you).
  • Revise your standard form contracts to ensure compliance with the new changes (remove or amend terms considered unfair before 10 November 2023).
  • Make necessary adjustments to avoid legal and reputational risks.
  • And consider the possible penalties!

What are the penalties for having Unfair Contract Terms?

  • Civil penalties for corporations and individuals imposed by the courts.
  • Infringement notices issued by regulators like ACCC and ASIC.
  • Disgorgement of benefits derived from Unfair Contract Term violations.
  • Courts may void, amend, or refuse to enforce part or all of a contract.
  • Penalties are calculated on a scale of options.
  • Penalties for corporations include the greater of AUD $50 million, three times the value of the benefit, or 30% of the adjusted turnover.
If the court finds you have an Unfair Contract Term, you will likely be subject to a MINIMUM $50 million penalty FOR THAT SINGLE TERM. If you are found to have 10 Unfair Contract Terms, that could be 10x as much (minimum) as a penalty!

Unfair Contract Terms Checklist

This table provides a checklist for businesses to assess their compliance with the unfair contract terms changes.

Checklist Item
Standard Form Contracts Identified

Identify if your business uses standard form contracts.
Review of Clauses for Unfair Terms
Check for terms that create imbalance, are unnecessary, or cause detriment.
Legal Advice Sought
Seek legal guidance if unsure about fairness.
Compliance with New Changes
Ensure compliance with new changes before 10 November 2023.
Consideration of Penalties
Understand potential civil penalties, infringement notices, and disgorgement of benefits.

This is not something you can afford to be caught out on.

I don't often tell people that they NEED to engage a Lawyer, but in this case you do.

And it's urgent!

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About the Author

Rachelle Hare

Rachelle Hare - Managing Director and Principal Practitioner of Blaze Business & Legal

Rachelle Hare

Rachelle Hare is a highly experienced Construction Lawyer and Contract Lawyer, with over 23 years of experience in Tier 1 and Tier 2 Construction Firms, Top Tier Private Practice and Government.

With 23+ years of experience as a Senior Lawyer, Strategic Contracting Adviser and Management Consultant in Construction Law, Contracts, Major Projects, Commercial Advisory, Compliance, Procurement, Contract Management and Risk Management, Rachelle has the rare skills to offer you seamless business advice and legal advice to help support your organisation.

As well as a Lawyer and Business Adviser, Rachelle has also acted as a Strategic Procurement Adviser, Compliance Manager, Strategic Risk Adviser and Commercial Manager.

Rachelle owns
Blaze Business & Legal, a combined Commercial Law Firm and Business Advisory Firm located in Brisbane, Queensland, Australia. Blaze Business & Legal assists a broad range of clients in the Construction Industry and related industries, and advises owners, contractors, subcontractors, NFPs and other organisations on a broad range of Construction Law, Commercial Law, Business Advisory and Management Consulting issues in Brisbane, Queensland and around Australia.

Rachelle also owns Blaze Professional Learning, where she offers practical contracting skills, hands-on experience in drafting and working with contracts, and industry insights to help Professionals upskill and advance their careers with real-world skills.

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