- What the Australian Consumer Law says about unfair contract terms
- What makes a telecommunications contract a standard form contract
- The 2023 reforms: from void to prohibited
- Who counts as a small business under the current law
- What unfair terms commonly look like in telco contracts
- Common mistakes businesses make when signing telco contracts
- How Artificer Legal can help your business
- Key takeaways
Most small business owners don't read their telecommunications contracts in detail before signing. That's understandable — the documents are long, the language is dense, and in most cases there is nothing to negotiate. You pick a plan and accept the terms as they are.
The problem is that some of those terms have historically been written entirely in the provider's favour. A clause allowing the provider to change your fees without telling you. A clause letting them cut off your service at any time, without notice. A clause saying you can't rely on anything a salesperson told you.
Australian law has increasingly targeted exactly these kinds of terms. Since significant reforms took effect on 9 November 2023, it is no longer enough for these terms to simply be declared unenforceable — they are now prohibited, and businesses that include them in their contracts can face substantial financial penalties. This article explains how the regime works, how to recognise an unfair term in a telecommunications contract, and what it means for your business.
What the Australian Consumer Law says about unfair contract terms
The unfair contract terms (UCT) regime is contained in the Competition and Consumer Act 2010 (Cth), specifically in Schedule 2, which is the Australian Consumer Law (ACL). The regime applies to standard form contracts between businesses and consumers or small businesses.
A term in a standard form contract is unfair if it:
- causes a significant imbalance in the parties' rights and obligations under the contract;
- is not reasonably necessary to protect the legitimate interests of the party who would benefit from it; and
- would cause financial or other detriment to the other party if it were relied on.
These three elements must all be present. A term that is commercially inconvenient for one side is not automatically unfair — there must be a genuine imbalance, and the term must not be justified by a real business need.
The ACL also sets out examples of the kinds of terms that may be unfair, including terms that allow one party but not the other to:
- avoid or limit performance of the contract;
- terminate the contract;
- vary the terms of the contract; or
- renew or not renew the contract.
A court or tribunal assesses whether a term is unfair by looking at the contract as a whole — a term that appears harsh in isolation might be balanced out by something elsewhere in the document.
What makes a telecommunications contract a standard form contract
The ACL's UCT protections only apply to standard form contracts. In the telecommunications context, that threshold is almost always met.
A contract is treated as a standard form contract if one party prepared it and the other had little or no ability to negotiate its terms. Courts look at several indicators, including:
- whether one party had all the bargaining power;
- whether the contract was prepared before any discussion with the other party;
- whether the other party was required to accept or reject the terms as a whole; and
- whether the terms were prepared without taking account of the specific transaction.
When a business signs up for a mobile plan, an internet service, or a cloud-hosted phone system, the provider will almost always have drafted the contract unilaterally. The business may be able to choose between plans, but it cannot negotiate the payment date, the termination notice period, the circumstances under which the provider may vary fees, or the dispute resolution process. That is the defining feature of a standard form contract.
The 2023 reforms: from void to prohibited
The UCT regime existed in the ACL from 2010 and was extended to small business contracts in 2016. Under that earlier framework, a court could declare an unfair term void — meaning the term would be stripped out of the contract, but the rest of the agreement would survive. There were no penalties for including unfair terms in the first place.
The Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) fundamentally changed that. From 9 November 2023:
- it is prohibited to make a standard form contract that contains an unfair term;
- it is prohibited to propose, use, apply, or rely on an unfair term once the contract is in place; and
- each unfair term in a contract can attract a separate penalty.
The maximum penalties are significant. For corporations, the penalty for each contravention is the greater of $50 million, three times the value of the benefit obtained from the conduct (where that can be determined), or 30 per cent of adjusted turnover during the period of the breach. For individuals, the maximum is $2.5 million per contravention.
The 2023 changes apply to contracts made, renewed, or varied on or after 9 November 2023. Contracts entered into before that date were not retroactively affected unless a term was varied or added afterwards.
Who counts as a small business under the current law
Prior to the 2022 reforms, the small business definition was narrowly drawn: a business had to employ fewer than 20 people, and the upfront price under the contract could not exceed $300,000 (or $1 million for contracts running longer than 12 months).
The current definition is considerably broader. A small business contract is one where at least one party:
- employs 100 or fewer people at the time the contract is made; or
- had an annual turnover for the most recent income year of less than $10 million.
The old price thresholds have been removed entirely. There is no longer an upfront contract value cap — a small business with fewer than 100 employees or under $10 million in turnover is protected regardless of what the contract is worth.
When counting employees, casual employees engaged on a regular and systematic basis are included. Part-time employees count as a fraction of a full-time equivalent.
What unfair terms commonly look like in telco contracts
The ACCC has previously reviewed telecommunications contracts and identified a number of terms it considered problematic. Common patterns include the following.
Unilateral variation of fees without notice. A clause permitting the provider to change subscription fees "from time to time" without providing advance notice. This allows the provider to increase what the business pays without the business being able to plan for it or exit the contract before the change takes effect.
Suspension or termination without notice. A clause allowing the provider to suspend or cut off services "at any time, without notice, at our absolute discretion." Where a business depends on internet connectivity or telecommunications to operate, an unexpected disconnection can be immediately damaging.
Non-reliance clauses. A clause stating that the business cannot rely on anything a sales representative said about the plan or product. These clauses are problematic because businesses frequently make decisions based on what they are told during a sales call, and the written contract may run to dozens of pages that most people do not read in full.
Each of these term types creates a significant imbalance: the provider can act unilaterally in ways that directly harm the business, while the business has limited or no corresponding rights.
Common mistakes businesses make when signing telco contracts
Even with the new UCT protections in place, there are several ways businesses expose themselves unnecessarily.
Assuming the law will fix it. The UCT regime is a backstop — it gives you a remedy if things go wrong, but it doesn't prevent a dispute from arising in the first place. A provider relying on a term that later turns out to be unfair may still cause significant disruption before the issue is resolved.
Not checking renewal terms. Many telecommunications agreements automatically renew on the same terms unless the business actively cancels. If the contract is renewed after 9 November 2023, the new UCT rules apply — but only the business that reads the renewal notice will know to check.
Treating verbal representations as binding. Under general contract law, verbal representations can form part of a contract or give rise to a claim for misleading conduct, but this requires evidence. Businesses should document what they are told during the sales process — in writing if possible — rather than relying on recollection later.
Signing without comparing. The existence of UCT protections does not mean all terms in a telecommunications contract are fair. Standard form status is assessed against what is reasonable for the industry, not against the best available alternative. Shopping around and comparing contracts before signing is still worthwhile.
How Artificer Legal can help your business
If you are signing a new telecommunications contract, reviewing an existing one, or dealing with a provider who is relying on a term you believe is unfair, legal advice can help you understand your position before you commit or before a dispute escalates.
At Artificer Legal, we can assist by:
- reviewing a telecommunications contract before you sign to identify terms that raise UCT concerns;
- advising whether a term that has been applied against your business is likely to be unfair under the ACL;
- corresponding with the provider on your behalf to have an offending term removed or modified;
- advising on the process for making a complaint to the ACCC or applying to a court or tribunal for relief; and
- reviewing your own standard form contracts if your business supplies goods or services under them, to ensure you are not exposed to penalty liability under the 2023 changes.
The 2023 reforms increased the stakes on both sides. Businesses that supply services under standard form contracts — including telecommunications providers — now face genuine financial exposure for unfair terms. Small businesses on the receiving end have stronger grounds and better remedies than before.
Key takeaways
The unfair contract terms regime under the ACL is the most significant protection available to small businesses dealing with telecommunications providers on standard form contracts. The 2023 reforms turned what was previously a remedy into a prohibition, added real financial consequences for providers, and substantially widened the category of businesses protected.
The core things to remember are:
- A term is unfair if it creates a significant imbalance in rights, is not reasonably necessary, and would cause detriment to you.
- Your telecommunications contract is almost certainly a standard form contract.
- Since 9 November 2023, proposing or relying on an unfair term is prohibited, not just ineffective — penalties can reach $50 million per contravention for a corporation.
- Your business is covered if you have 100 or fewer employees or annual turnover under $10 million — the old price thresholds no longer apply.
- The protections apply to contracts made, renewed, or varied on or after 9 November 2023.
If you have questions about a term in a contract you are reviewing or dealing with, contact Artificer Legal for advice specific to your situation.