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The ACCC has made unfair contract terms a key enforcement priority for 2025-26, targeting standard form contracts where at least one party is a small business. If you're operating with under 100 employees or turnover below $10 million, you're both protected by the regime and potentially liable under it - depending on whose contract contains unfair terms.
Most business owners I work with don't realise their standard terms contain provisions that may attract enforcement action. The unfair contract terms regime prohibits certain clauses - it's not just about whether you can enforce them, it's that including them in your contracts at all creates legal exposure. This matters particularly now because I still see problematic clauses in standard form contracts that small businesses are using with their customers, and because the ACCC is actively reviewing these agreements across industries.
The regime creates three separate ways to contravene the law: proposing an unfair term, entering into a contract containing one, or attempting to rely on one. Each carries substantial penalties. Understanding what the ACCC is targeting in 2026 helps you identify which contracts need immediate review.
What are unfair contract terms? Contract provisions in standard form small business contracts that create significant imbalance between parties' rights and obligations, aren't reasonably necessary to protect legitimate interests, and would cause detriment if enforced.
When does this matter? When you're using standard form contracts in your business - whether you're the small business proposing terms to customers, or a larger business contracting with smaller counterparties. The ACCC's 2025-26 enforcement priorities specifically target these arrangements, and I'm still seeing problematic clauses in contracts currently being used.
Key insight: The prohibition applies at three stages - proposing terms, entering contracts containing them, and relying on them. Most businesses focus on whether they can enforce terms, but exposure exists the moment you present a contract containing unfair provisions.
Why guidance helps: Understanding which common business terms attract scrutiny, how unfairness is assessed and what contract amendments protect your position whilst maintaining commercial objectives.
Think through the standard form contracts your business uses with customers or suppliers. Terms that give you unilateral rights whilst restricting the other party's options often create imbalance. Automatic renewal clauses that make cancellation difficult, excessive early termination fees, and broad variation rights all appear on the ACCC's enforcement radar.
The test isn't just whether you'd actually enforce these terms harshly. It's whether the terms themselves create significant imbalance and aren't reasonably necessary. Terms that seemed standard when you implemented them five years ago may not survive current scrutiny. Your assessment needs to consider whether each term protects a legitimate business interest or just gives you maximum flexibility at the other party's expense.
The Australian Consumer Law defines unfair contract terms through a three-part test. All three elements must be present for a term to be unfair, but the interaction between them creates complexity most businesses don't initially recognise.
A term is unfair if it would cause a significant imbalance in the parties' rights and obligations, isn't reasonably necessary to protect the legitimate interests of the party who would benefit from the term, and would cause detriment to a party if it were relied on or enforced.
The significant imbalance element looks at the substantive effect of the term. Terms that give one party unilateral rights whilst restricting the other party's ability to enforce their own rights create imbalance. This includes provisions allowing you to vary terms, suspend services, or terminate without corresponding rights for the other party. It also covers terms that limit your liability whilst holding the other party to strict performance obligations.
What catches businesses off guard is the "reasonably necessary" test. You might have legitimate business reasons for including a term, but the question is whether the specific wording and breadth of the term is reasonably necessary to protect those interests. A clause allowing you to vary pricing might protect legitimate interests, but a clause allowing unlimited variation at your sole discretion without notice probably isn't reasonably necessary to achieve that protection.
The detriment element considers both financial and non-financial harm. This includes the cost of enforcing rights, lost business opportunities, and being locked into unfavourable arrangements. When contracts involve businesses, the assessment considers commercial detriment rather than just consumer protection concerns.
Courts and regulators also consider several additional factors. These include whether the term is transparent (clearly expressed and presented), whether the contract as a whole is standardised with limited negotiation, and whether the other party had a genuine opportunity to negotiate the term. The ACCC's enforcement approach treats terms in genuine standard form contracts more strictly than terms in negotiated agreements, even when both parties are businesses.
The unfair contract terms regime changed significantly in November 2023. Before that date, unfair terms in small business contracts were simply void and unenforceable - businesses faced minimal consequences for including them beyond losing the ability to rely on those specific provisions. Since November 2023, the regime creates three separate prohibitions with substantial penalties attached.
This historical change matters now because many businesses are still using contracts drafted before 2023 that haven't been updated. The ACCC's 2025-26 enforcement priorities specifically target these outdated agreements, which is why contract review has become urgent for SMEs.
The prohibition structure works like this: you can't propose to include an unfair term in a small business contract, you can't enter into a contract that contains an unfair term, and you can't apply or rely on an unfair term. Each prohibition can be contravened separately. This means your exposure begins when you present a standard form contract to a potential customer, not just when you try to enforce a problematic term.
Penalties changed dramatically. Courts can now impose civil penalties up to $50 million for corporations or three times the benefit obtained from the contravention (whichever is greater). For individuals, penalties reach $2.5 million. The ACCC can also seek non-punitive orders including declarations, injunctions, and orders to remedy loss suffered by affected parties.
The regime's scope expanded significantly. It now covers contracts where at least one party is a business with fewer than 100 employees or annual turnover under $10 million, and the contract's upfront price payable doesn't exceed $5 million (or $10 million if the contract duration exceeds 12 months). This captures substantially more commercial arrangements than the previous consumer-focused regime.
What's particularly significant is that businesses can't contract out of the regime. Including a clause stating that parties acknowledge terms are fair, or that the contract isn't a standard form contract, doesn't provide protection. The assessment focuses on the substantive nature of the terms and the contract formation process, not what the contract itself claims.
The ACCC's compliance and enforcement priorities for 2025-26 specifically target four types of terms that commonly appear in small business contracts. These represent the areas where businesses face highest enforcement risk in the near term.
Harmful cancellation terms include provisions that make it difficult or costly for the other party to exit the contract. This covers automatic renewal clauses that require long periods of notice before each renewal period, contracts that continue indefinitely unless cancelled with lengthy notice periods, and terms that impose substantial charges for exercising cancellation rights. I still see these regularly in service agreements, software subscriptions, and lease arrangements where businesses want to lock in recurring revenue.
Automatic renewal provisions attract scrutiny when they create unfair lock-in effects. Terms that automatically renew for the same period as the original term, require lengthy notice before renewal to avoid automatic continuation, or make it disproportionately difficult to exit compared to entering the contract all create exposure. The ACCC distinguishes between reasonable notice requirements that allow parties to plan, and provisions designed to trap the other party into ongoing commitments.
Early termination fee clauses face particular scrutiny. The assessment looks at whether fees genuinely represent the legitimate cost and loss from early termination, or whether they operate as penalties to discourage exit. Terms that charge flat fees regardless of remaining contract duration, impose fees that exceed the remaining contract value, or fail to distinguish between termination with cause and termination for convenience all create risk.
Non-cancellation clauses that completely prevent the other party from terminating in any circumstances attract enforcement attention. Whilst businesses can require minimum terms or notice periods, provisions that trap parties in contracts regardless of changed circumstances or poor service delivery create significant imbalance.
The ACCC's approach considers the cumulative effect of multiple terms. A contract might have individually defensible provisions for renewal, cancellation, and fees, but when combined they create an unfair overall position where the other party has limited practical ability to exit.
Beyond the ACCC's stated priorities, several other term types regularly appear in small business contracts that create unfair contract term exposure. Understanding these helps identify provisions that need revision.
Unilateral variation rights allowing one party to change prices, service levels, or terms without corresponding rights for the other party create imbalance. Terms stating "we may vary these terms at our discretion by notifying you" don't typically survive scrutiny, particularly when notice periods are short and the other party's only option is to terminate with penalties.
Broad exclusions or limitations of liability that prevent the other party from claiming for breaches whilst holding them to strict performance standards create unfairness. This is particularly problematic when limitations apply to fundamental breaches or when liability caps are set so low they're disproportionate to the contract value or risk profile.
One-sided indemnities requiring the other party to indemnify you for broad categories of loss whilst you provide no reciprocal protection create obvious imbalance. Terms requiring indemnification for your own negligence or requiring indemnities that far exceed the likely risk or contract value attract scrutiny.
Payment terms with penalty characteristics including charging interest or fees that exceed genuine administrative costs, imposing fees for actions the business would perform anyway, or structuring payment arrangements that trap the other party into escalating charges all create exposure.
When contracts involve supply arrangements, terms that allow you to suspend supply for minor breaches whilst requiring the other party to continue paying, or terms that require minimum purchase obligations whilst giving you discretion to refuse supply, create significant imbalance.
For franchise and distribution arrangements, terms that allow you to establish competing businesses near the franchisee's territory, require franchisees to purchase goods exclusively from you at prices you set, or allow you to terminate the relationship whilst retaining substantial fees or security create particular concern.
Understanding how businesses contravene the regime helps clarify where legal exposure actually exists. The three prohibition provisions work differently and create separate risk points in the commercial relationship.
Proposing an unfair term means liability can arise before any contract is entered. When you present a standard form contract to a potential customer or supplier that contains unfair terms, you've potentially contravened the regime even if negotiations don't proceed to execution. This applies regardless of whether you eventually remove the problematic terms through negotiation. The ACCC's position is that the initial proposal itself can constitute a contravention.
This creates particular exposure for businesses using outdated standard forms. You might not intend to enforce harsh terms, or might be willing to negotiate, but presenting the contract creates risk. When you're using the same standard form with multiple parties, each presentation is a separate potential contravention.
Entering into contracts containing unfair terms creates liability when contracts are executed. Both parties can potentially contravene this prohibition, though the ACCC typically focuses enforcement on the party who drafted the standard form and benefits from the unfair terms. The fact that the other party signed the contract, or had the opportunity to seek legal advice, doesn't eliminate your exposure.
Applying or relying on unfair terms creates liability when businesses attempt to enforce problematic provisions. This includes threatening to enforce terms, taking action based on terms, or requiring the other party to comply with unfair provisions. You don't actually need to succeed in enforcing the term for this prohibition to apply - merely attempting to rely on it can constitute a contravention.
The cumulative nature of these prohibitions means businesses face potential liability at multiple stages. A single unfair term in a standard form contract used with 50 customers creates 50 potential contraventions from proposing, 50 from entering the contracts, and additional contraventions each time you attempt to rely on the term.
Most businesses approach contract review by asking whether specific terms are unfair. The more useful framework considers what legitimate interests you're protecting and whether your current wording achieves that protection without creating imbalance.
Start with termination and cancellation provisions. You're entitled to require minimum terms and reasonable notice periods. What creates problems is making exit disproportionately difficult or expensive compared to what's genuinely necessary to protect your business. Terms that require 90 days notice but only provide 30 days notice when you terminate create obvious imbalance. Termination fees that represent genuine loss from early exit are defensible, but flat penalty-style fees regardless of timing attract scrutiny.
Automatic renewal clauses need particular attention. You can include renewals, but the notice period to opt out needs to be reasonable and the contract should make the renewal mechanism transparent. Terms that renew for another 2-year period with 120 days notice required to prevent renewal create lock-in effects that attract enforcement attention.
Variation rights require reciprocity or justification. You might legitimately need to vary prices to reflect cost increases, but unilateral variation rights without limits or corresponding rights for the other party create imbalance. Better approaches include linking variations to objective criteria, requiring reasonable notice, or giving the other party a genuine right to terminate if variations are unacceptable.
Liability provisions need to be balanced and proportionate. You can limit liability for certain types of loss, but excluding all liability including for your own breaches whilst holding the other party to strict obligations creates unfairness. The assessment looks at whether limitations are proportionate to the contract value and risk profile, and whether both parties have similar protections.
For payment and fee structures, the test is whether amounts charged represent genuine costs or operate as penalties. Late payment interest can be reasonable if it reflects actual costs and market rates. Administrative fees for processing payments, sending reminders, or managing accounts need to be genuinely related to administrative costs, not revenue generation opportunities.
The regime only applies to standard form contracts, which creates an important threshold question. Many businesses assume that any contract they're willing to negotiate isn't a standard form contract. The assessment is more nuanced.
Courts consider multiple factors. The key question is whether the other party genuinely had an opportunity to negotiate terms or whether they effectively had to accept or reject what was offered. The fact that some terms were negotiated doesn't mean the entire contract stops being standard form - particular terms can be standard form even if other aspects were negotiated.
Factors courts consider include: whether one party prepared the contract and offered it on a take-it-or-leave-it basis, whether another party had effective opportunity to negotiate its terms, whether there was any real negotiation before the contract was entered, and whether another party was required to engage in costly or time-consuming negotiation to have any opportunity to vary the contract.
The sophistication of parties matters, but not in the way businesses often assume. Even when both parties are commercial entities with legal advice available, courts have found contracts to be standard form where one party offered terms on a take-it-or-leave-it basis. The test focuses on the formation process, not the parties' relative negotiating power.
Minor modifications to standard contracts don't necessarily change their character. Filling in blank fields for party names, contract duration, or pricing often doesn't convert a standard form into a negotiated agreement. Similarly, the other party suggesting amendments that you reject doesn't mean they had genuine opportunity to negotiate if your position is effectively "accept our terms or no contract."
When assessing your contracts, consider whether other parties realistically could negotiate unfavorable terms, whether you've got a track record of making substantive changes based on customer requests, and how much market power you hold relative to typical counterparties. If you're offering standard terms that smaller businesses effectively must accept to get your product or service, you're likely dealing with standard form contracts regardless of theoretical negotiation opportunities.
This work involves reviewing your standard form contracts against the unfair contract terms regime, identifying provisions that create exposure, and restructuring terms to protect legitimate business interests whilst meeting compliance requirements.
I work with business owners to assess which contracts require immediate attention, understand what each term is actually trying to achieve commercially, and redraft provisions that maintain commercial effectiveness whilst eliminating unfair contract term risk. The value isn't just marking up problematic clauses - it's understanding what you're genuinely trying to protect and how to achieve that protection in ways that withstand scrutiny.
For businesses using multiple contract types across different service lines or customer segments, this includes prioritising review based on usage frequency and enforcement likelihood, and developing templates that work across your business operations whilst maintaining compliance.
Get advice before using standard form contracts if:
Professional guidance is particularly valuable when you need to balance legitimate business protection with compliance requirements, or when your standard forms are used frequently and changes need to be implemented systematically across customer relationships.
Published by Jackie Atchison, Principal | LexAlia Property & Commercial Law
Northern Beaches, Sydney | Serving NSW for property matters | Australia-wide for business law
No, this doesn't provide protection. Courts assess whether a contract is standard form by looking at the actual formation process, not contractual declarations. Including clauses stating that parties acknowledge the contract was negotiated, or that terms are fair, doesn't prevent the regime applying if the substantive reality is that you offered standard terms on a take-it-or-leave-it basis.
The prohibitions on entering contracts containing unfair terms only apply to contracts entered from 9 November 2023 onwards. However, if you're still proposing those same terms to new customers, you're potentially contravening the proposal prohibition. Additionally, if you attempt to rely on unfair terms in existing contracts, you can contravene the reliance prohibition regardless of when the contract was signed.
It depends on how the variation right is structured. You can include price variation provisions, but unilateral variation rights without limits or objective criteria create exposure. Terms that link variations to specific cost indices, require reasonable notice, and give the other party a genuine right to terminate if increases are unacceptable are more defensible than broad discretionary variation rights.
The regime applies based on whether at least one party is a small business (under 100 employees or turnover under $10 million). If you're the small business and the other party proposes a standard form contract containing unfair terms, they can contravene the regime. If you're proposing the contract, you need to assess whether your terms create unfair contract term exposure.
Yes, the ACCC can initiate investigations without customer complaints. Their 2025-26 enforcement priorities specifically target reviewing standard form contracts across industries to identify unfair terms. This means businesses can face enforcement action based on the ACCC's proactive compliance work, not just in response to customer complaints.
