Under Australian law, a commercial contract may be considered unfair if it creates a significant imbalance in the parties’ rights and obligations, is not reasonably necessary to protect legitimate business interests, and would cause financial or operational harm if enforced. These principles are primarily governed by the Australian Consumer Law (ACL), which applies not only to consumers but also to certain business-to-business transactions.
Standard form contracts are particularly vulnerable to scrutiny. These are contracts offered on a “take it or leave it” basis, with little or no opportunity for negotiation. Common examples include supply agreements, franchise contracts, service agreements, and lease arrangements.
Recognising unfair terms is the first step in challenging them. In the context of Commercial and Corporate Law, red flags often include:
Clauses allowing one party to unilaterally vary pricing or services
Automatic renewal terms without clear exit options
Excessive penalties for early termination
Limitations of liability that disproportionately favour one party
Clauses allowing one party to avoid or limit performance
If a contract term heavily favours one party and exposes the other to unreasonable risk, it may be legally challengeable.
Legal Framework in Australia
Recent reforms to Australian Commercial and Corporate Law have strengthened protections against unfair contract terms. As of November 2023, unfair contract terms are no longer merely void — businesses can now face substantial penalties for including them.
The Australian Competition and Consumer Commission (ACCC) actively enforces these provisions, particularly where unfair terms impact small businesses. This shift reflects a stronger regulatory stance aimed at promoting fairness and transparency in commercial dealings.
Steps to Challenge an Unfair Commercial Contract
Review the Contract ThoroughlyBegin by identifying any terms that appear unreasonable or excessively one-sided. Legal language can be complex, so a detailed review by a commercial lawyer is highly recommended.
The contract value falls within statutory thresholds
Understanding whether your contract qualifies under these criteria is critical.
Attempt NegotiationIn many cases, unfair contract disputes can be resolved through negotiation. Raising concerns with the other party may result in amendments, particularly if they wish to avoid regulatory scrutiny or legal action.
Seek Legal AdviceEngaging a lawyer experienced in Commercial and Corporate Law ensures your position is properly assessed. Legal professionals can advise whether a term is likely to be deemed unfair and recommend the best course of action.
Take Formal Legal ActionIf negotiation fails, affected parties may:
Apply to a court to have the unfair term declared void
Report the matter to the ACCC
Seek compensation if losses have occurred
Courts will assess fairness by considering the contract as a whole, not just isolated clauses.
Risks of Ignoring Unfair Contracts
Failing to address unfair contract terms can lead to long-term financial exposure, operational constraints, and legal disputes. From a Commercial and Corporate Law perspective, proactive contract management is a key risk-mitigation strategy for Australian businesses.
With increased penalties now in force, businesses that continue using unfair contracts may also suffer reputational damage and regulatory sanctions.
Preventing Unfair Contracts in the Future
To minimise risk:
Avoid using generic or outdated templates
Ensure contracts are tailored to your specific business needs
Maintain transparency and balance in contractual obligations
Conduct regular legal reviews of standard form agreements
Sound contract practices are not only a legal safeguard but also a foundation for sustainable commercial relationships.
Why Commercial and Corporate Law Advice Matters
Commercial contracts sit at the heart of every business operation. Accessing professional guidance in Commercial and Corporate Law helps businesses navigate complex regulations, negotiate fair terms, and respond effectively when disputes arise.
Whether you are entering a new agreement or reassessing existing contracts, legal oversight ensures compliance with Australian law and protects your commercial interests.
If you suspect your business is bound by an unfair contract, don’t wait until it becomes a costly dispute.
Speak with an experienced Commercial and Corporate Law professional. Contact New South Lawyers today to review your agreements and protect your business’s future.
