Skip to content

Is Your Business Consumer Contract Unfair Towards Customers?

The Australian legal framework allows capable commercial parties to contract and engage in business dealings they deem appropriate. There is an underlying assumption that parties will complete their due diligence and make themselves aware of the legal implications of the contracts they enter. Nevertheless, there are checks and balances in the law to protect consumers and small businesses from exploitation. In this article, we discuss unfair consumer contracts and the steps you should take to ensure your contracts with your customers are not unfair. 

What is a Consumer Contract?

A consumer contract is a contract in connection with supplying goods or services or a sale or grant of an interest in land to an individual, who intends to use those goods, services, or interest wholly or predominantly for personal, domestic or household use or consumption.

For instance, it may include: 

  • selling furniture or electronic appliances to consumers;
  • building contracts concerning the construction of a residential house; or
  • a contract of sale concerning a property.

Unfair Terms in Consumer Contracts

An unfair term in a consumer contract is a term that would cause a significant imbalance in the parties’ rights and obligations arising under the contract and is not reasonably necessary to protect the legitimate interests of the party who the term would advantage. Additionally, the term must cause detriment to a party if it were to be applied or relied on by the other party. Usually, the business that offers the goods, services, or interest benefits from unfair terms in a consumer contract while the customers are affected detrimentally.

The unfair consumer contract regime only applies to standard-form contracts. These are contractual terms proposed by one party that are not generally negotiable. Consequently, the other party has no bargaining power. Accordingly, they must either accept the terms or walk away from the contractual arrangement. In consumer contracts, the party providing goods, services or interest will provide the standard-form contract. 

Continue reading this article below the form
Loading form

Consequences of Unfair Terms

If a court deems that a term in a consumer contract is unfair, then that term is void and not enforceable. The rest of the contract will operate to the extent it can without the unfair term. 

Importance of Transparency 

In assessing whether a term is unfair, a court will examine whether the contract terms are transparent. Therefore, terms in your consumer should be in reasonably plain language, legible, presented clearly and readily available to any party affected by the term. This means you should ensure your consumer contract is: 

  • free of legal jargon;
  • not presented in a small font; and 
  • not difficult to read and comprehend.
Front page of publication
Guide to Protecting Your Brand

Your business’ brand represents your values, identity and reputation. Learn how to create a successful brand and protect it.

Download Now

Example of Unfair Terms 

Let us explore terms that are generally considered unfair in a consumer contract. If your consumer contracts have similar terms, you should consider removing them or amending them to the extent that it does not affect your legitimate business interest.

One-sided PenaltiesA term that penalises your customer for a breach or termination of the contract, but the same penalty does not apply to you. An example of this is a term that allows you to terminate a contract where there is a non-consequential breach of the contract by the customer, whereas a similar breach by you comes with no consequences.
One-sided Renewal PowerA term that unilaterally allows you to vary or renew the contract, but the same right does not apply to the customer.
One-sided Varying PowerA term that allows you to unilaterally vary the characteristics of the goods or services to be supplied or the interest in land to be sold or granted under the contract.
Assignment PowerA term that permits you to assign the contract to the detriment of your customer without that customer’s consent.
Limiting Your Legal LiabilityA term that limits your customer’s ability to take legal action against you.
One-sided Interpretation PowerA term that permits you to unilaterally determine whether the contract has been breached or to interpret its meaning.

Key Takeaways

A consumer contract is a contract to supply goods or services or a sale or grant of an interest in land to an individual who intends to use those goods, services, or interest wholly or predominately for non-commercial purposes. Suppose there are unfair terms in consumer contracts. Accordingly, those terms will be removed, and the remainder of the contract will operate. Unfair contractual terms do not protect the parties’ legitimate interests. Instead, they create significant power imbalances between parties and cause detriment to the party not benefiting from the term if enforced. Therefore, if your consumer contracts have unfair terms, you should consider amending or removing them. 

If you need advice on whether your consumer contracts have unfair terms, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What is a consumer contract?

A consumer contract is a contract in connection with supplying goods or services or a sale or grant of an interest in land to an individual, who intends to use those goods, services, or interest wholly or predominantly for personal, domestic or household use or consumption. For instance, selling furniture or electronic appliances to consumers, building contracts concerning the construction of a residential house or contract of sale concerning the property are all examples of consumer contracts. 

What happens if my contract contains an unfair term?

If a court deems that a term in a consumer contract is unfair, then that term is void and not enforceable. The rest of the contract will operate to the extent it can without the unfair term. 

Register for our free webinars

ACCC Merger Reforms: Key Takeaways for Executives and Legal Counsel

Online
Understand how the ACCC’s merger reforms impact your legal strategy. Register for our free webinar.
Register Now

Ask an Employment Lawyer: Contracts, Performance and Navigating Dismissals

Online
Ask an employment lawyer your contract, performance and dismissal questions in our free webinar. Register today.
Register Now

Stop Chasing Unpaid Invoices: Payment Terms That Actually Work

Online
Stop chasing late payments with stronger terms and protections. Register for our free webinar.
Register Now

Managing Psychosocial Risks: Employer and Legal Counsel Responsibilities

Online
Protect your business by managing workplace psychosocial risks. Register for our free webinar.
Register Now
See more webinars >
Stebin Sam

Stebin Sam

Read all articles by Stebin

About LegalVision

LegalVision is an innovative commercial law firm that provides businesses with affordable, unlimited and ongoing legal assistance through our membership. We operate in Australia, the United Kingdom and New Zealand.

Learn more

We’re an award-winning law firm

  • Award

    2025 Future of Legal Services Innovation Finalist - Legal Innovation Awards

  • Award

    2025 Employer of Choice - Australasian Lawyer

  • Award

    2024 Law Company of the Year Finalist - The Lawyer Awards

  • Award

    2024 Law Firm of the Year Finalist - Modern Law Private Client Awards

  • Award

    2022 Law Firm of the Year - Australasian Law Awards