If you run a small business in Australia, there is a reasonable chance that most of the contracts sitting in your inbox arrived pre-written, with a "sign here" instruction and no real opportunity to negotiate. These are standard form contracts, and they are exactly what the unfair contract terms (UCT) regime under the Australian Consumer Law (ACL) — Schedule 2 of the Competition and Consumer Act 2010 (Cth) — is designed to regulate.
Since 9 November 2023, the rules changed substantially. What was once a remedy — getting an unfair clause declared void — is now a prohibition. Proposing, using, or relying on an unfair contract term in a standard form contract is illegal, and the penalties are serious. For a company, courts can impose fines of up to $50 million, or three times the benefit obtained from the conduct, or 30 per cent of the company's annual turnover during the breach period — whichever is greatest.
This article walks through the types of clauses that have repeatedly attracted ACCC scrutiny and court declarations, so you can recognise them whether you are signing a contract or drafting one.
What the law covers — and who counts as a small business
The UCT regime applies to standard form contracts where at least one party is a small business and the contract is for the supply of goods or services, or the sale of an interest in land. Under the 2023 changes, a small business is one that employs fewer than 100 people. The previous contract value threshold has been removed entirely, so there is no longer a dollar cap below which the protections kick in.
A standard form contract is one prepared by one party, offered on a take-it-or-leave-it basis, where the other side has no effective opportunity to negotiate the terms. Since November 2023, a contract is presumed to be standard form unless the party who drafted it can prove otherwise. Allowing the other side to negotiate a few minor terms does not displace that presumption.
A term crosses into unfair territory when all three of the following are true: it creates a significant imbalance in the parties' rights and obligations under the contract; it is not reasonably necessary to protect the legitimate interests of the party who benefits from it; and it would cause detriment — financial or otherwise — to the other party if applied or relied upon.
Six clause types the ACCC has repeatedly called out
The examples below are drawn from ACCC enforcement actions and published guidance. They represent the clause patterns most commonly challenged since the small business protections commenced.
Automatic rollover without adequate notice
The facts. Waste management company JJ Richards & Sons used a standard contract with small businesses that automatically renewed for a further term unless customers cancelled within 30 days before the end of the contract. The ACCC took court action, and the Federal Court declared eight terms in the contract unfair and void — including this rollover clause.
Why it crossed the line. The clause bound a small business to another full term with minimal notice window, giving the supplier a structural advantage: inertia alone locked customers in. The customer carried all the risk of missing the cancellation window; the supplier carried none.
A well-drafted renewal clause instead gives the customer adequate notice before the rollover date and allows exit without penalty if that notice was inadequate or the customer was not actively informed.
Unilateral price variation
The facts. JJ Richards also included a term allowing it to increase prices unilaterally during the contract term, without the customer's consent and without a right to exit.
Why it crossed the line. Price is a fundamental term of any supply contract. A clause that lets one party change the price after the contract is signed — while the other party remains bound — creates an obvious imbalance. The customer agreed to a particular commercial arrangement; the right to walk away when that arrangement changes materially is what keeps the clause from being unfair.
If your contract allows price variation, the counterparty should receive written notice and have the right to terminate without penalty if they do not accept the new price.
Blanket liability exclusions
The facts. JJ Richards included a term removing its liability in all circumstances where performance was "prevented or hindered in any way" — an extremely broad exclusion that the Federal Court declared unfair.
Fujifilm Business Innovation Australia faced similar scrutiny. In 2022, the Federal Court declared 38 terms across 11 of Fujifilm's standard form small business contracts unfair, including terms that broadly limited Fujifilm's liability or required customers to indemnify Fujifilm without any equivalent protection running the other way.
Why it crossed the line. A limitation of liability clause is not automatically unfair. A proportionate clause that caps liability at the contract value or excludes liability for consequential loss in defined circumstances can reflect legitimate commercial risk management. The problem arises when the exclusion is drafted so broadly that the supplier faces no real liability for anything — even its own failures — while the customer remains fully exposed.
A balanced approach: state clearly what liability is excluded and what remains, and ensure the customer retains their rights under the ACL, which cannot be contracted out of.
Hair-trigger termination rights on one side only
The facts. Fujifilm's contracts allowed Fujifilm to terminate in a wider range of circumstances than the customer could. One party could exit for many reasons; the other could not.
Why it crossed the line. Termination rights need to be reasonably mutual. A clause that lets the supplier terminate for any breach — while the customer can only exit in very narrow circumstances — concentrates power on the supplier's side without justification. It is even more problematic where the customer has no opportunity to remedy the breach before termination is invoked.
What a sound termination clause looks like: grounds for termination are stated clearly; both parties have access to those grounds; and a party in breach has a reasonable opportunity to remedy the breach before the other can terminate.
Early exit fees that go beyond genuine loss
Early termination fees are not inherently unfair, but they become unfair when they are set at a level that penalises the customer rather than compensating the supplier for its actual loss.
The ACCC's published position is that such fees should be a genuine pre-estimate of the loss the supplier will suffer as a result of early termination — and should account for costs the supplier no longer needs to incur once the services stop being provided. A fee that charges for the full remaining contract term, without any offset for saved costs, is likely to attract scrutiny.
If the counterparty asks to exit early and the contract specifies a termination fee, the question worth asking is: does this fee reflect what we would actually lose, or is it designed to deter departure? The latter is where liability tends to arise.
Terms that misstate or exclude statutory rights
The facts. The ACCC has identified contracts that include statements suggesting a customer has no right of return, no right to a remedy for defective goods, or that the supplier's liability is limited to replacement of the goods — without making clear that the ACL guarantees cannot be excluded.
Why it crosses the line. Under the ACL, consumers and certain small businesses have statutory guarantees that cannot be contracted away. A clause that implies those rights do not exist, or that the supplier's remedial obligations are narrower than the law requires, misleads the counterparty about their legal position. That is unfair regardless of how the clause reads in isolation.
Contracts should include a clear statement that nothing in the agreement limits any rights a party has under applicable law, including the ACL.
The pattern across these examples
Three features appear consistently in the clause types that have drawn ACCC action and court declarations:
- Asymmetry. The clause gives one party a right, power, or protection that the other does not have — the ability to change price, to terminate, to escape liability — without a legitimate commercial reason proportionate to that asymmetry.
- Absence of a meaningful exit. The customer who is disadvantaged by the clause has no practical way out: they cannot leave without penalty, cannot accept or reject changes, and cannot obtain a remedy.
- Breadth beyond what is necessary. The clause is drafted in wider terms than the supplier needs to protect a genuine interest. A supplier may legitimately need a force majeure carve-out; it does not need a clause that removes all liability regardless of circumstances.
If a clause in your contract (whether you are the drafter or the party being asked to sign) exhibits all three features, it deserves close scrutiny.
Practical checks for your own contracts:
- Does the contract let one party change key terms without the other's consent? If so, is there a right to exit without penalty?
- Is the termination clause genuinely mutual — same rights, same notice, same opportunity to remedy?
- Do your early exit fees reflect a genuine estimate of loss, not a commercial deterrent?
- Does any limitation of liability clause leave the other party with no meaningful remedy?
- Does anything in the contract suggest the other party's ACL rights are reduced or do not apply?
How Artificer Legal can help you assess your contracts
The three-part test — significant imbalance, not reasonably necessary, and detriment — sounds straightforward in isolation, but applying it to a specific clause in a specific commercial relationship requires careful analysis. A clause that is enforceable in one context can cross the line in another, depending on the nature of the relationship, the bargaining history, and the practical effect of the term if exercised.
When a client brings a standard form contract to Artificer Legal, we work through the agreement clause by clause. For each potentially problematic term, we assess whether a court would find a significant imbalance on the facts, whether the supplier has a legitimate interest that justifies the term as drafted, and whether there is a version of the clause that protects that interest without the imbalance. Where you are the party issuing the contract, we will identify your exposure under the post-November 2023 regime — including the penalty risk — and recommend redrafts that protect your commercial position without crossing into territory the ACCC has flagged.
If you have been asked to sign a contract and a clause concerns you, we can advise on whether you are likely protected under the UCT regime and what options you have before you sign.
The sharpest test: would this clause work the same way if it ran the other way?
Across the examples above — from JJ Richards to Fujifilm, from rollover clauses to blanket liability exclusions — one heuristic consistently separates the clauses that survived from those that were declared unfair: could the clause, in substance, run the other way without the contract making commercial sense?
A mutual price variation clause — where either party could change the price — would obviously be unworkable. That asymmetry is the point: the clause only functions because it is one-sided. That is precisely what makes it unfair.
Key points from this article:
- Since 9 November 2023, using an unfair contract term in a standard form small business contract is illegal — not merely voidable — and attracts significant financial penalties.
- A small business is one that employs fewer than 100 people. The old contract value threshold no longer applies.
- A contract is presumed to be standard form unless the drafter proves otherwise; allowing minor negotiations does not rebut that presumption.
- A term is unfair if it creates a significant imbalance, is not reasonably necessary to protect a legitimate interest, and would cause detriment to the other party.
- The clause types most frequently found unfair include automatic rollovers with inadequate notice, unilateral price variation without exit rights, blanket liability exclusions, asymmetric termination, excessive early exit fees, and terms that misstate statutory rights.
- Whether you are signing or issuing standard form contracts, legal review against the current regime is worthwhile before a dispute — or an ACCC investigation — forces the point.