Reading time: 3 minutes

Small businesses that enter into contracts to provide or receive goods or services will always encounter some level of bargaining and negotiation. The Australian Consumer Law (ACL) offers small businesses protection from unconscionable conduct. This is because small businesses fall under the definition of a consumer under the ACL if they acquire goods or services for an amount that does not exceed $40,000. Determining whether one party has engaged in unconscionable conduct during this stage will come down to their actions. Below, we answer three FAQs about small businesses and unconscionable conduct and provide an overview of protection afforded to small businesses under the ACL.

1. What Does the ACL Say About Unconscionable Conduct?

Sections 20-22 cover unconscionable conduct, most relevantly for small businesses:

  • Section 20 which prevents a person in trade or commerce from engaging in unconscionable conduct within the meaning of the “unwritten law”; and
  • Section 22 which prevents a person in trade or commerce from engaging in unconscionable conduct that is in all circumstances deemed unconscionable.

Unwritten law refers to existing case law and what the courts have interpreted as unconscionable in the past.

Has a Business Acted Unconscionably?
  • Did the business act in good faith?
  • Does the business have rights to vary a term or condition of a contract unilaterally?
  • Was the business willing to negotiate the terms and conditions?
  • How did the business’ conduct compare to similar transactions?
  • Did the business have an obligation to comply with any industry codes?
  • Did the business require the other party to comply with conditions that were not reasonably necessary for their protection?
  • What was the bargaining power of the business?
  • Did the business provide documents relating to the transaction that the other party could understand?
  • Did the business exercise undue influence or unfair tactics?

2. How Does This Affect Small Businesses?

If a small business believes that another party has engaged in unconscionable conduct, they can seek protection under the ACL. The small business will, however, be required to prove that the other party engaged in unconscionable conduct, looking at the answers to the questions mentioned above.

Small businesses should be aware of the different scenarios in which unconscionable conduct may occur, including:

  • entering into a contract;
  • negotiating a contract;
  • varying terms of a contract; or
  • enforcing the terms of the contract.

3. What are the Potential Outcomes of Unconscionable Conduct?

Small businesses relying on the ACL’s protections can seek compensation for losses or damages they have incurred. Other possible outcomes include:

  • making a term in a contract void;
  • allowing a term in a contract to be varied;
  • receiving a refund; or
  • requiring the other party to perform a particular term in a contract.

The party that has engaged in unconscionable conduct may also be responsible for paying financial penalties.


If you are a small business and have questions about unconscionable conduct, get in touch with our specialist consumer lawyers on 1300 544 755.


Australia’s Global Talent Visa: How to Attract Top Talent

Thursday 7 October | 11:00 - 11:45am

Understand how to navigate Australia’s complex migration system to attract top overseas talent with our free webinar.
Register Now

5 Essential Contracts for your Online Business

Thursday 14 October | 11:00 - 11:45am

Learn which key contracts will best protect your online business with our free webinar.
Register Now

Key Considerations When Buying a Business

Thursday 11 November | 11:00 - 11:45am

Learn which questions to ask when buying a business to avoid legal and operational pitfalls, so you can hit the ground running. Join our free webinar.
Register Now

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

Our Awards

  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer