Unfair contract terms law

Since 1 July 2010, ASIC has administered the law to deal with unfair terms in standard form consumer contracts for financial products and services. From 12 November 2016, the unfair contract terms law will also cover standard form small business contracts.

The unfair contract term protections for consumers were introduced as part of the broader national Australian Consumer Law, which was fully implemented from 1 January 2011. Aspects of this law, including the unfair contract term protections, are also reflected in the Australian Securities and Investments Commission Act 2001.

Like consumers, small businesses have limited market power and a reduced ability to vary 'take it or leave it' contracts. In recognition of this, the unfair contract terms law will also provide protections for small businesses.

The unfair contract term protections will apply to standard form small business contracts entered into, or renewed, on or after 12 November 2016, where:

  • the contract is for the supply of financial goods or services
  • at least one of the parties is a 'small business' (i.e. a business employing fewer than 20 people, including casual staff employed on a regular and systematic basis), and
  • the upfront price payable under the contract does not exceed $300,000, or $1 million if the contract is for more than 12 months.

If a term of a contract is varied on or after 12 November 2016, the protections will apply to that term but not to the rest of the contract.

The unfair contract terms law assists ASIC to perform our role in promoting investor and financial consumer trust and confidence, and ensuring fair, orderly and transparent markets.

The law gives courts a power to find that a term is 'unfair'. If a term is found to be unfair, it will be void – which means it is not binding. The rest of the contract will continue to bind the parties if it is capable of operating without the unfair term.

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Last updated: 23/03/2016 03:05