- Docket No. 0003
- Desk Australian Consumer Law
- Checked 08·10·2026
Unfair contract terms with suppliers
If a supplier’s standard form contract with a small business contains an unfair term, the Australian Consumer Law makes that term void, and the rest of the contract still binds both sides if it can work without it. Proposing an unfair term in such a contract, or relying on one, is also a contravention for which a court can impose a penalty.
General information, not legal advice. This docket reads sections 23 to 28 of the Australian Consumer Law, Schedule 2 to the Competition and Consumer Act 2010, in the compilation registered on 24 September 2026, and business.gov.au’s page on laws affecting contracts. A lawyer can tell you whether a particular term in your own contract is likely to be unfair.
Field 1Which contracts are covered
The protection reaches two kinds of contract: consumer contracts, and small business contracts. Either way, the contract has to be a standard form contract, the kind one side prepares and the other is handed.
A small business contract is one for goods, services, or an interest in land, where at least one of the parties passes either or both of two tests at the time the contract is made:
| Test | What the Act asks | How it is counted |
|---|---|---|
| People | The party makes the contract while carrying on a business and employs fewer than 100 people. | Casual staff count only if employed on a regular and systematic basis. Part-time staff count as a fraction of a full-time equivalent. |
| Turnover | The party’s turnover for its last income year, ending at or before the contract, is less than $10,000,000. | The value of the supplies it made, leaving out input-taxed supplies, supplies not made for consideration, supplies outside its enterprise and supplies not connected with Australia. |
Those tests apply to contracts made or renewed on or after 9 November 2023; contracts made or renewed before that date fall under the older, narrower tests. The exception is a term varied or added in an older contract on or after that date: the new rules then apply to that term, as if the varied contract had been made on the day of the change.
Among the contracts the unfair terms rules don’t apply to are contracts of marine salvage or towage, the charter of a ship, the carriage of goods by ship, and a company’s constitution.
Field 2Is it a standard form contract?
If someone in a court case says a contract is a standard form contract, the court presumes it is, unless the other side proves it isn’t. The court weighs who held the bargaining power, whether the terms were written before any talk about the deal and offered on a take-it-or-leave-it basis, and how many other contracts the same side has made on similar terms.
Being allowed to change a minor detail, or to pick from a menu of options the supplier wrote, doesn’t stop a contract from being standard form.
Field 3When a term is unfair
Section 24 sets three conditions, and a term is unfair only if all three are met:
- it would cause a significant imbalance in the parties’ rights and obligations under the contract;
- it isn’t reasonably necessary to protect the legitimate interests of the side it favours;
- it would cause detriment, financial or otherwise, to a party if it were applied or relied on.
Two details tilt the test. The court must look at the contract as a whole and at how transparent the term is: whether it is in reasonably plain language, legible, clearly presented and readily available to the party it affects. And the second condition is presumed to be met unless the side that benefits from the term proves otherwise.
Field 4Terms the Act gives as examples
Section 25 lists kinds of term that may be unfair. A term on this list isn’t automatically unfair, but each one is worth reading slowly when it turns up in a supplier’s agreement. Most of them work in one direction only: they give one party (but not the other) the right to
- (a)avoid or limit its own performance of the contract
- (b)end the contract
- (c)penalise the other for a breach or for ending it
- (d)vary the terms
- (e)renew the contract, or not renew it
The list goes on to terms that let one party:
- (f)change the upfront price without the other being able to end the contract
- (g)change on its own what goods or services it will supply
- (h)decide on its own whether the contract has been breached, or what it means
- (j)assign the contract to the other’s detriment without consent
And to terms that limit a party’s responsibility for its agents, limit a party’s right to sue, limit the evidence a party can bring, or put the burden of proof on one party in a dispute about the contract.
Field 5What the law leaves alone
The main kinds of term outside the test are those that do the following, and only to that extent:
- define the main subject matter of the contract: what is actually being supplied;
- set the upfront price, meaning the price disclosed at or before the time the contract is made, not charges that depend on something happening later;
- are required, or expressly permitted, by a Commonwealth, state or territory law, or are included in the contract by a law that regulates it.
So the rules won’t rewrite a price you agreed to, but a fee that only applies if something happens later is not part of the upfront price.
Field 6When the standard form is yours
The same rules apply in the other direction. A business that sends its own purchase terms to small suppliers on a take-it-or-leave-it basis may be the party proposing a standard form small business contract.
Under section 23, a person who makes such a contract and proposed an unfair term in it contravenes the law, and each unfair term proposed counts as a separate contravention. Applying or relying on an unfair term in one is a contravention too, and the Act notes that a pecuniary penalty may be imposed for either.
business.gov.au describes the result for the term itself: a court or tribunal can cancel it, and if the contract can carry on without it, the rest stays in force.