- From 9 November 2023, unfair contract terms (UCT) in standard form contracts are void and penalisable under s 23 of the Australian Consumer Law (Sch 2, Competition and Consumer Act 2010 (Cth)).
- The small business threshold expanded to businesses employing fewer than 100 persons OR with annual turnover under $10 million, up from the previous 20-employee cap.
- Penalties for companies can reach $50 million, 3x the benefit obtained, or 30% of annual turnover, whichever is greatest. Individuals face up to $2.5 million.
- A term is unfair under s 24 if it causes a significant imbalance in rights, is not reasonably necessary to protect a legitimate interest, and would cause detriment if relied upon.
- The exemptions under s 26 are narrow: terms defining the main subject matter or setting the upfront price are excluded.
Unfair contract terms in Queensland business contracts are now subject to direct financial penalties under Australian Consumer Law, specifically s 23 of Schedule 2 to the Competition and Consumer Act 2010 (Cth). From 9 November 2023, a standard form contract containing an unfair term is not only void but exposes the party relying on it to penalties of up to $50 million. Every Queensland business that uses standard form contracts with customers or suppliers must understand what changed and whether their contracts now create legal and financial exposure.
What Changed in November 2023?
The Competition and Consumer Amendment (Fair Trading) Act 2023 (Cth) made two fundamental changes to the unfair contract terms regime, both taking effect on 9 November 2023.
1. The Small Business Threshold Expanded Significantly
Previously, a “small business contract” was one where at least one party employed fewer than 20 persons. From 9 November 2023, the threshold under Australian Consumer Law was broadened to cover contracts where at least one party either:
- employs fewer than 100 persons, OR
- has an annual turnover under $10 million.
This is a dramatic expansion. Businesses that previously operated with the comfort that the UCT regime did not apply to their contracts, because their counterparty employed more than 20 people, may now find those same contracts are covered. Medium-sized businesses dealing with other medium-sized businesses need to reassess their standard form agreements.
The upfront price threshold was also removed. Previously, contracts above a monetary cap were excluded. That exclusion no longer exists, the regime now applies regardless of the contract value.
2. Pecuniary Penalties Were Introduced
Before 9 November 2023, the consequence of an unfair term was that the term was void under s 23, the court could declare it unenforceable, but there were no direct financial penalties for including it. This approach had limited deterrent effect.
The 2023 amendments changed this entirely. Courts can now impose pecuniary penalties against a party that proposes, applies, or relies on an unfair term in a standard form contract covered by the regime. The maximum penalties are among the highest in Australian consumer law:
- Companies: the greater of $50 million, 3 times the benefit obtained from the conduct, or 30% of the company’s adjusted turnover during the relevant period.
- Individuals: up to $2.5 million per contravention.
Each term that is declared unfair and relied upon can constitute a separate contravention. A business with multiple problematic clauses across many contracts faces compounding exposure.
What Is a Standard Form Contract?
The UCT regime applies only to “standard form contracts.” The definition in s 27A of the Australian Consumer Law gives courts a framework for making this assessment. A court will consider whether:
- one party prepared the contract;
- the other party had no effective opportunity to negotiate the terms;
- the contract was presented on a “take it or leave it” basis;
- the terms are consistent with contracts used by that party in similar transactions.
No single factor is determinative. Courts look at the substance of the arrangement. A contract labelled “negotiated” may still be treated as a standard form contract if the counterparty had no real power to alter its substantive terms.
In practice, the following types of agreements used by Queensland businesses are commonly assessed as standard form contracts: subcontractor agreements, services agreements, franchise documents, supplier terms and conditions, software licence agreements, commercial lease templates, and equipment hire terms.
If your business sends the same agreement to multiple counterparties without material changes, it is almost certainly a standard form contract for the purposes of Australian Consumer Law.
When Is a Contract Term Unfair?
Section 24 of the Australian Consumer Law sets out a three-part test. A term is unfair if it:
- would cause 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 be advantaged by the term; and
- would cause detriment (financial or otherwise) to the other party if it were relied upon.
All three elements must be satisfied. The onus rests on the party seeking to rely on the term to establish that the term was reasonably necessary to protect a legitimate interest. This is a significant burden because the defaulting party, the one using the term, must justify its inclusion.
Courts consider the contract as a whole when assessing fairness. A term that might appear harsh in isolation may be acceptable if the overall contract is balanced. Conversely, a term that appears neutral on its face may be unfair when its practical effect is considered alongside the rest of the agreement.
For Queensland businesses involved in commercial disputes, the practical implication is that if a counterparty relies on a clause in litigation, a defence can be mounted that the clause is void as an unfair term. This can be used offensively as well, to challenge clauses in contracts your business has signed. Our commercial litigation lawyers in Brisbane regularly advise businesses on whether contract terms can be challenged on this basis.
The 8 Most Common Unfair Terms in Queensland Business Contracts
Section 25 of the Australian Consumer Law provides a non-exhaustive list of terms that may be unfair. The following table sets out the eight types most frequently encountered in Queensland commercial contracts, with a practical explanation of why each raises a risk.
| Term Type | Practical Example | Why It Raises Risk |
|---|---|---|
| Unilateral variation | Supplier can change pricing or service terms at any time without consent | Allows one party to alter the deal after the other party has committed (s 25(1)(a)) |
| Unilateral termination | Supplier can terminate immediately for any breach, no matter how minor | Asymmetric termination rights with no equivalent protection for the other side (s 25(1)(b)) |
| Limitation of liability, one party only | Supplier’s liability capped at $500 regardless of loss caused; customer’s liability unlimited | Creates significant imbalance in financial exposure (s 25(1)(d)) |
| Asymmetric penalties | Customer pays liquidated damages for late payment; supplier faces no penalty for late delivery | Penalises one party for breach but not the other (s 25(1)(e)) |
| Automatic renewal without notice | Annual contract renews for another 12 months unless cancelled 90 days before expiry | Traps the customer in a renewed contract they may not have intended to enter (s 25(1)(g)) |
| Entire agreement / entire satisfaction clauses | All prior representations excluded; customer accepts the service “as is” | Can deny the customer the benefit of pre-contractual representations they relied on |
| Unilateral right to assign | Supplier can transfer its obligations to a third party without customer consent | Removes the customer’s right to deal with the party they chose (s 25(1)(h)) |
| Broad indemnity clauses | Customer indemnifies supplier for all losses including those caused by the supplier’s own negligence | Significant imbalance, the customer bears the financial risk of the other party’s conduct |
These terms are not automatically unfair, context matters. A limitation of liability clause at a heavily discounted price may be justifiable as protecting a legitimate commercial interest. But if your contracts contain several of these provisions in favour of your business, they merit immediate review. Boss Lawyers’ commercial litigation team advises on both contract review and responding to UCT claims.
What Are the Penalties?
The penalty structure introduced by the Competition and Consumer Amendment (Fair Trading) Act 2023 (Cth) is designed to make UCT compliance financially unavoidable. The maximum penalties per contravention are:
- Companies: the greater of $50 million, three times the value of the benefit obtained from the conduct, or 30% of the company’s adjusted annual turnover during the contravention period.
- Individuals: up to $2.5 million.
The ACCC has signalled that it will take enforcement action against businesses in Queensland and Australia that continue to rely on unfair terms after the November 2023 amendments. Early enforcement precedents, including ACCC v JJ Richards & Sons Pty Ltd [2017] FCA 1224, which was decided before the penalty regime was introduced and therefore resulted in declarations of voidness only, demonstrate the ACCC’s willingness to pursue UCT litigation. The same conduct under the current regime would expose the respondent to substantial financial penalties in addition to declarations.
Directors and officers of companies that rely on unfair terms should also be aware that the ACCC may pursue them personally in appropriate cases, particularly where they were involved in drafting or implementing the relevant terms.
What Contracts Are NOT Covered?
Section 26 of the Australian Consumer Law carves out two specific categories of terms from the unfair terms regime:
- Terms that define the main subject matter of the contract. The core commercial bargain, what the parties agreed to buy and sell, falls outside the regime. A term specifying that a supplier will provide 500 widgets of a defined specification is not subject to UCT scrutiny.
- Terms that set the upfront price payable under the contract. The headline price for the goods or services is excluded. The UCT regime is not a mechanism for courts to re-price commercial transactions.
These exemptions are narrower than many businesses assume. The exclusion for “upfront price” does not extend to price variation mechanisms, late payment fees, or charges that arise after the initial transaction. A clause allowing the supplier to impose additional charges is a term of the contract, not the upfront price, and is subject to the s 24 test.
Additionally, certain contracts are excluded from the Australian Consumer Law framework entirely:
- Shipping contracts (governed by international maritime law).
- Contracts for financial products and services that fall under the Australian Securities and Investments Commission Act 2001 (Cth), the ASIC Act has its own UCT regime mirroring the ACL provisions.
If you are uncertain whether a particular contract falls inside or outside the UCT regime, legal advice is essential before relying on any term that might otherwise be questioned. Our team advises on misleading and deceptive conduct in commercial contracts and related consumer law issues across Queensland.
What Queensland Businesses Should Do Now
With penalties now in force and the ACCC actively monitoring compliance, Queensland businesses should take the following practical steps:
- Audit your standard form contracts. Identify every agreement your business uses repeatedly with customers, suppliers, or subcontractors. Compile a list of the contracts and their key terms.
- Apply the s 24 three-part test to each clause. For each term that operates in your favour, ask: does it create a significant imbalance? Is it reasonably necessary to protect a legitimate interest? Could it cause detriment if relied on? Any term that fails this test is a candidate for removal or redraft.
- Pay particular attention to the s 25 examples. Unilateral variation, unilateral termination, asymmetric liability, auto-renewal, and broad indemnity clauses are the highest-risk categories. If your contracts contain these, they should be reviewed as a priority.
- Update your contracts going forward. Contracts that have already been executed cannot be retroactively made UCT-compliant by amendment, but you can ensure that new versions of your standard terms are compliant. This protects you on all future contracts.
- Seek legal advice before relying on any contested clause. If a counterparty disputes a clause in your standard form contract, or if you are considering disputing a clause in a contract you have signed, legal advice on UCT exposure should be your first step. The interaction between UCT, debt recovery, and commercial litigation strategy is a core area of our practice.
Talk to a Commercial Contracts Lawyer in Brisbane
Boss Lawyers advises Queensland businesses on contract review, unfair contract terms compliance, and commercial disputes. If you have received a letter from the ACCC, been served with a court application, or simply want to know whether your standard form contracts expose you to penalty risk, Mark Harley can advise you on your position and your options.
Contact Boss Lawyers on 1300 267 711 or through our commercial litigation page for practical advice specific to your business.
Frequently Asked Questions
Do the unfair contract terms laws apply to business-to-business contracts in Queensland?
Yes. Since 9 November 2023, Australian Consumer Law s 23 applies to standard form contracts where at least one party employs fewer than 100 persons or has an annual turnover under $10 million. Business-to-business contracts are fully covered where these thresholds are met.
What happens if a court declares a term unfair?
Under s 23, an unfair term in a standard form consumer or small business contract is void. The rest of the contract continues to operate if it is capable of existing without the unfair term. In addition to declaring the term void, courts can now impose pecuniary penalties of up to $50 million for companies and $2.5 million for individuals.
Can I negotiate my standard form contract to avoid the UCT regime?
Genuine negotiation can be a factor in whether a contract is treated as a standard form contract under s 27A. However, minor cosmetic changes to a template will not convert it into a negotiated contract. Courts look at whether the counterparty had a real opportunity to alter the substantive terms. If the core terms were non-negotiable, the contract is likely to remain classified as a standard form contract.
I signed a contract containing what I think is an unfair term, what can I do?
If you believe a term in a standard form contract that you have signed is unfair under s 24, you may be able to apply to a court to have the term declared void. The ACCC can also bring proceedings on behalf of affected businesses. You should obtain legal advice promptly, particularly if the other party is seeking to rely on the term in a dispute or claiming damages or fees under it.
Does the upfront price exclusion cover all pricing terms in a contract?
No. Under s 26, only the upfront price payable is excluded from UCT scrutiny. Price variation clauses, additional charges, late fees, and adjustment mechanisms are all subject to the s 24 unfairness test. A supplier cannot simply label a charge as part of the “price” to avoid the regime, the exclusion is interpreted narrowly.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
