In short
Yes. A term in a standard-form small-business contract can be void if a court finds it unfair. That means the term doesn’t bind the parties. The rest of the contract can continue if it can operate without that term.
But a difficult bargain isn’t automatically an unfair contract term. The law applies only if the contract and the business fall within the statutory rules, and only a court can finally decide whether a term is unfair.
Does the small-business protection cover your contract?
For contracts made or renewed on or after 9 November 2023, the Australian Consumer Law can cover a contract for goods, services or an interest in land if at least one party made it in the course of business and, when the contract was made, that party either:
- employed fewer than 100 people; or
- had turnover of less than $10 million for its preceding income year.
Regular and systematic casual employees count, and part-time employees are counted as an appropriate fraction of a full-time employee. There is no longer an upfront-price ceiling under this test.
The 2023 rules apply to new and renewed contracts. If a term is varied or added on or after 9 November 2023, the new rules apply to that term. The date and history of an older agreement therefore matter.
Is your agreement a “standard form” contract?
A standard-form contract is usually prepared by one party for repeated use and offered largely on a take-it-or-leave-it basis. The law presumes a contract is standard form unless the party that prepared it proves otherwise.
A court looks at the real bargaining process. It can consider who held the bargaining power, whether the document was prepared before the deal was discussed, whether you had a genuine opportunity to negotiate, and whether the terms were adapted to your transaction.
Changing a price, choosing from options set by the supplier or negotiating a minor term doesn’t necessarily stop the agreement being standard form.
What makes a term unfair?
A term is unfair only if all three parts of the legal test are met:
- it causes a significant imbalance between the parties’ rights and obligations;
- it isn’t reasonably necessary to protect the legitimate interests of the party advantaged by it; and
- it would cause financial or other detriment if applied or relied on.
The advantaged party must prove that the term is reasonably necessary to protect its legitimate interests. A court must also read the contract as a whole and consider how transparent the term is—whether it is expressed clearly, presented legibly and readily available.
For example, a supplier may need a right to change a delivery schedule when events outside its control occur. A broad right to change price, scope and timing for any reason, while forcing you to keep paying and denying you a right to leave, is much harder to justify. A fair exit right or other balancing protection can change the result.
Which terms commonly raise questions?
The wording and the whole deal matter, but questions commonly arise where one party alone can:
- end or renew the contract;
- change the price, services or other terms;
- avoid or limit responsibility for non-performance;
- decide whether a breach occurred or interpret what the contract means;
- impose a disproportionate termination fee or other penalty;
- keep payments for services not supplied; or
- transfer the contract without protecting the other party’s position.
A one-sided clause isn’t automatically unlawful. It may be justified by a real risk and balanced elsewhere in the agreement. Clear wording alone won’t make a one-sided allocation of risk fair.
Are any contract terms outside these rules?
The unfair-term regime doesn’t apply to a term that defines the contract’s main subject matter, sets the upfront price payable, or is required or expressly permitted by law. Some contracts are also excluded, including company constitutions and specified contracts connected with shipping and financial markets.
Financial products and financial services are governed by a parallel regime in the Australian Securities and Investments Commission Act 2001. If your dispute concerns a loan, insurance or another financial product, different statutory rules may apply, so first identify which regime covers it.
What happens if the term is unfair?
If a court declares the term unfair, it is void. The rest of the contract remains binding if it can operate without the term. Depending on the case, a court can also refuse to enforce provisions, vary or void all or part of the contract, make injunctions, or order other relief to prevent or address loss. The available orders are fact-specific; the legislation doesn’t give an automatic damages payment merely because a term is unfair.
Since 9 November 2023, proposing an unfair term in a covered standard-form contract, or applying, relying on or purporting to rely on one, is prohibited and can attract civil penalties. This is not limited to terms that have already caused loss.
What should you do if the other party relies on the term?
Act before a cancellation, payment or response deadline passes. Keep the signed contract, every version and renewal, the proposal, negotiation emails, invoices and the notice in which the other party relied on the clause.
Then work through four questions: Was the agreement made, renewed or varied after the relevant date? Did at least one party satisfy the small-business test? Was the contract standard form in substance? Does the term meet all three parts of the unfairness test when the contract is read as a whole?
You can ask the other party not to rely on the term and propose a balanced replacement. If the issue isn’t resolved, our commercial disputes service can help you assess urgent court relief, dispute-resolution requirements and any other contractual or statutory claims. An ACCC report doesn’t determine your private dispute, and an informal objection doesn’t automatically suspend the contract.
Is a contract term putting your business at risk?
Biz Lawyers & Advisory can review the agreement, the negotiation history and the term being relied on, then explain the practical options available to your business.
Contact Biz Lawyers & Advisory or call 1800 893 836.
This article is general information, not legal advice. Whether the law applies depends on the contract, dates, parties and circumstances.
Primary sources
Law and guidance checked 20 August 2026.
