This guide explains how to challenge an unfair contract term legally, how Litigation and Dispute Resolution methods apply, and what steps you can take to protect your rights under Australian Consumer Law (ACL).
What Is Considered an Unfair Contract Term in Australia?
Under the Australian Consumer Law, a contract term may be deemed “unfair” if it meets the following criteria:
It creates a significant imbalance between the rights of the parties.
It is not reasonably necessary to protect the legitimate interests of the advantaged party.
It would cause you detriment (financial or otherwise) if enforced.
Common examples include:
unilateral price increases without your approval;
automatic renewals without clear disclosure;
termination rights benefiting only one party;
allowing one party to vary terms at any time;
unfair penalties for breaching or ending a contract.
As of the latest reforms, penalties for using unfair terms have become far more serious, especially for large businesses. This means more pathways are available for you to challenge them.
Review the Contract and Gather Evidence
Before taking action, carefully review your contract and identify:
The exact wording of the alleged unfair term
Any correspondence, emails, or messages relating to the clause
Financial or personal impacts caused by the term
Whether you had any opportunity to negotiate the agreement
Gathering this information early helps build a stronger case, especially if litigation becomes necessary.
Raise the Issue With the Other Party
Many disputes can be resolved before escalating to formal processes. Contact the supplier, service provider, or business to explain:
why the term is unfair,
how it affects you, and
what outcome you seek (e.g., contract amendment, refund, fee waiver).
While not all parties will agree to compromise, attempting to negotiate shows good faith and strengthens your position should the matter proceed to Litigation and Dispute Resolution processes.
Seek Assistance Through a Dispute Resolution Body
If direct negotiation fails, several Australian agencies can help:
ACCC (Australian Competition and Consumer Commission)The ACCC enforces the unfair contract terms provisions under the ACL and may intervene in serious or widespread cases.
State and Territory Fair Trading bodiesThey provide guidance, mediation, and help resolve consumer disputes without court action.
Ombudsman servicesDifferent industries, such as telecommunications and financial services, have independent ombudsmen who may review your dispute at no cost.
These pathways are often faster and more cost-effective than litigation.
Engage Legal Support
For complex or high-value disputes, obtaining legal advice is crucial. A solicitor specialising in Litigation and Dispute Resolution can:
review the contract in detail,
assess whether the term is likely to be deemed unfair,
draft a formal demand letter, and
outline litigation prospects if negotiation fails.
Early legal guidance is especially important for businesses facing significant commercial impacts.
Challenge the Term Through Litigation
If all other dispute resolution avenues fail, you may challenge the unfair term in court. Depending on the type and value of the dispute, this could be through:
the Federal Court of Australia,
a State or Territory Supreme Court, or
a local civil tribunal (such as VCAT, NCAT, QCAT, or SACAT).
A court can:
declare the term void;
prevent the business from relying on the term;
order compensation for losses;
issue penalties for the use of unfair terms.
Litigation can be a longer and more expensive pathway, but it is the most definitive method of obtaining a legally binding outcome.
While litigation is often seen as the last resort, dispute resolution methods—such as mediation, negotiation, and conciliation—play a vital role. Australian courts themselves often require parties to attempt mediation before a full hearing.
A clear strategy combining both negotiation and legal action where necessary ensures you pursue the most cost-effective path while protecting your legal rights.
If you believe you’re facing an unfair contract term, don’t navigate the process alone.
Contact New South Lawyers today. Protect your rights, negotiate a fair outcome, and take legal action if necessary.
