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A term in a consumer contract is unfair if is causes a significant imbalance in the parties’ rights and obligations, and is not reasonably necessary in protecting the legitimate interests of the party who would have been advantaged by the term. If a term is found to be ‘unfair’, it will be void, which means that it is not binding. Speak with a commercial solicitor if you believe you are the victim of an unfair contract term.

What is the legislation?

In 2010, national Australian Consumer Law was amended to protect those in consumer contracts, for financial products and financial services, from any unfair terms.

The Australian Securities and Investment Commission (“ASIC”) administered new laws which prohibit unconscionable or misleading and deceptive conduct in contractual dealings. The new provisions also give additional protection to consumers and investors by giving courts power to find that a term is unfair.

The law covering unfair contract terms only applies to contracts entered into or varied after 1 July 2010 when the new laws came into effect. Contracts entered into before this date are not protected unless they are renewed or varied on or after July 1 2010.

What types of contracts do the unfair contract term provisions apply to?

The laws surrounding unfair contract terms apply to ‘consumer contracts’, which are defined by the Act as being exclusively for the supply of good or services, or the sale or grant of an interest in land to an individual who acquires it wholly or predominantly for personal, domestic or household use of consumption. These are otherwise known as standard form consumer contracts; where the terms and conditions of the contract are set by only one of the parties. The other party has little or no ability to negotiate and are in a “take it or leave it” position. In these situations, speak with a commercial solicitor to get the right advice as to how to proceed.

These are commonly used across a range of industries including telecommunications, utilities, domestic building and finance. Consumers and investors regularly enter into standard form contracts for financial services on a day-to-day basis for things like credit cards and home loans.

Standard form contracts are protected by unfair terms laws, but individually negotiated contracts and contracts relating to the supply of goods or services or financial products between businesses are not covered.

What contracts and terms are excluded from unfair contract terms laws?

Not all contracts for financial products and services are covered. The unfair contract terms provisions do not cover insurance contracts regulated under the Insurance Contracts Act 1984, and nor do they apply to constitutions of companies, managed investment schemes or other kinds of bodies. 

Similarly, some specific terms are not covered by the Act. The following are not included in the unfair contract term provisions:

  • Terms which define the main subject matter of the contract;
  • Terms that set the upfront price payable under the contract; or
  • Any terms which are required or permitted by Commonwealth, state or territory laws.

How do I know if a term is unfair?

The fairness of a term must be considered in the context of the contract as a whole. As a party to the contract, you have a responsibility to protect your own interests and that includes being on the lookout for terms you may think are unfair.

To do this you might want to ask yourself:

  • Does this term cause a significant imbalance between my rights and obligations and those of the other party?
  • Is the term reasonably necessary to protect the legitimate interests of the other party?
  • Would the term cause me any detriment (financial or non-financial burden) if the other party tried to enforce the term?
  • Is the term transparent? Is it expressed in reasonably plain language, legible, presented clearly and readily available to all parties?

These questions can help you recognize a potentially unfair term, but it is important to note that the final decision on whether a term is unfair can only be made by a court.

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

You can make a complaint directly to your financial services provider. If this is unsuccessful, you can take your complaint to the Australian Financial Complaints Authority. You can also make a complaint directly to ASIC, however these bodies do not function to endorse contract terms or state that terms are unfair, it is up to the courts to determine whether a term is fair or not.


Consumer contracts are entered into all the time and the law protects consumers by offering considerable protection against unfair terms. If you are a consumer or an investor, and you are uncomfortable with a particular term in a contract that you are entering into, you should speak to a specialist contract lawyer or commercial solicitor.


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