Changes To Unfair Contract Terms Laws Taking Place In November 2023

If your business uses standard form contracts or online terms and conditions, the unfair contract terms (UCT) rules changed in a big way from 9 November 2023.

Until now, an “unfair term” in a standard form contract could be declared void by a court or tribunal. From 9 November 2023, it’s not just void - proposing, using or relying on an unfair term is unlawful and can attract significant penalties.

For Australian small businesses, this is a major compliance moment. The law now applies to far more contracts and counterparties than before, and the risks for getting it wrong are much higher. The good news? With a thoughtful review and some sensible redrafting, you can make your contracts fair, enforceable and still commercially robust.

In this guide, we’ll break down what changed, who’s caught, what the penalties look like, and how to get your documents compliant without losing the commercial protections you need.

What Changed On 9 November 2023?

The UCT reforms under the Australian Consumer Law (ACL) and the Australian Securities and Investments Commission Act (ASIC Act) commenced on 9 November 2023. Here’s the plain-English summary of what that means for you.

• Unfair contract terms are now prohibited: It’s unlawful to propose, apply, rely on, or seek to enforce an unfair term in a standard form consumer or small business contract. Previously, an unfair term was simply void - now, there can be penalties for using it at all.
• Significant civil penalties apply: Courts can order penalties for each unfair term. This means the same contract could expose you to multiple contraventions if it contains more than one unfair clause or if the clause is used multiple times.
• Broader coverage: The definition of “small business” has expanded (more on this below), capturing many more counterparties and therefore more contracts.
• Standard form clarified: The legislation clarifies that a contract can be “standard form” even if some minor negotiation occurred, options were selected, or another party was given a limited choice of terms.
• Applies to new, renewed and varied contracts: The new rules apply to contracts entered into, renewed, or varied on or after 9 November 2023. If you vary an older contract, the new regime can apply to the varied terms.

In short: these aren’t cosmetic changes. The reforms change the legal risk for common clauses like unilateral price changes, broad indemnities, one-sided termination rights, automatic renewals with limited exit windows, and disproportionate fees.

Which Contracts And Businesses Are Caught?

The UCT rules apply to standard form contracts that are either consumer contracts or small business contracts. Many everyday business documents fall into this category - including online terms, subscription agreements, SaaS terms, supply agreements, contractor agreements and terms of trade.

Small Business Definition Is Much Broader

From 9 November 2023, a contract is a “small business” contract if, at the time it’s made, at least one party has:

• Fewer than 100 employees; or
• Turnover of less than $10 million in the previous financial year.

Importantly, the previous contract value thresholds are gone. Under the reforms, it doesn’t matter whether the price is $1,000 or $1 million - if the counterparty meets the employee or turnover test and the contract is standard form, the UCT regime can apply.

What Is A “Standard Form” Contract?

Think of a standard form contract as your business’s go-to set of terms - the document you present on a “take it or leave it” basis with little room for genuine negotiation. The reforms also make it clear that:

• Limited negotiation or allowing a party to choose from pre-set options can still be standard form.
• Using the same template across customers is a strong indicator of a standard form.
• Where one party has much stronger bargaining power, a contract will often be standard form, even if you tweak a few clauses.

Common examples include website terms, subscription terms, service agreements, supply terms, and Terms of Trade. If your team regularly uses a template with minor adjustments, you should assume it’s likely a standard form contract.

When Do The New Rules Apply?

• Contracts entered into on or after 9 November 2023.
• Contracts renewed on or after that date (the renewed contract is assessed under the new rules).
• Contracts varied on or after that date (the varied terms are subject to the new rules).

It’s wise to review both new contracts and any ongoing templates you’ll keep using. If you rely on older templates without changes, you can unintentionally carry unfair terms into post‑November deals.

What Are The Penalties And Risks For Businesses?

Under the ACL, the maximum penalties for companies are substantial. For each contravention, a court can impose the greater of:

• $50 million;
• Three times the value of the benefit obtained; or
• 30% of the company’s adjusted turnover during the period of the breach.

Individuals can face penalties up to $2.5 million per contravention. Comparable penalties also apply under the ASIC Act for financial products and services contracts.

Keep in mind that a court can treat each unfair clause as a separate contravention, and each time you rely on it can be another. This can multiply the exposure quickly for businesses that use the same clauses across many customers.

Financial penalties aside, there are real operational risks:

• Enforceability risk: A key clause (e.g. limitation of liability, indemnity, unilateral variation, rollover/auto-renewal) could be struck out, leaving you exposed.
• Dispute cost: Unclear or one-sided terms invite complaints, regulatory scrutiny and disputes.
• Reputational risk: Acting on an unfair term can damage customer trust and brand value.

The smarter path is to design fair, balanced terms that will stand up under the new rules - and still protect your legitimate business interests.

What Does “Unfair” Look Like In Practice?

A term may be unfair if it:

• Causes a significant imbalance in the parties’ rights and obligations.
• Isn’t reasonably necessary to protect your legitimate interests.
• Would cause detriment (financial or otherwise) to the other party if relied on.

In assessing unfairness, courts look at the whole contract and how transparent the term is (plain language, clear formatting, and whether it’s presented prominently). For context, clauses that can attract attention include:

• Unilateral variation (you can change price or key features without a genuine right to exit for the customer).
• Auto-renewals with tight or hidden cancellation windows.
• Broad indemnities or liability caps that only protect you, regardless of fault.
• Early termination or “break” fees that are out of proportion to your actual costs.
• Set-off clauses or payment terms that allow you to suspend services while still charging in all scenarios.

For example, if your terms include a flat “late fee” without a genuine pre-estimate of loss, that could be scrutinised. If you use late fees, sense-check them against the ACL and review how you frame them in your terms. You can read more about the issues around charging late fees in Australia.

Also remember: unfair contract terms co-exist with other ACL obligations like prohibitions on misleading or deceptive conduct. The ACCC may look at your overall customer journey (including advertising and representations) alongside your contracts. If you’re reviewing your terms, it’s a good time to ensure your marketing aligns with section 18 of the ACL too.

How To Get Your Contracts Compliant (Step-By-Step)

If you’ve been meaning to tighten up your templates, now’s the time. Here’s a practical roadmap you can follow.

1) Inventory Your Standard Form Contracts

List every template or set of terms you use as a matter of course - sales agreements, supplier terms, onboarding packs, online checkout terms, Customer Contracts, SaaS agreements, and partner or reseller agreements.

2) Map Your Counterparties

Note whether your customers or suppliers could meet the “small business” test (fewer than 100 employees or turnover under $10m). If you can’t be sure, assume they might. In many industries, the majority of customers will qualify.

3) Prioritise High-Risk Clauses

Identify terms likely to raise flags, such as unilateral variation, automatic rollover, broad indemnities, one-sided termination rights, and disproportionate fees or liquidated damages. Also check your limitation of liability clauses - rebalancing them now can avoid a nasty surprise later.

4) Redraft With Fairness And Transparency In Mind

• Use plain English and highlight significant terms (pricing changes, renewals, cancellation rights, liability caps) so customers won’t miss them.
• Where you need flexibility (e.g. to change features or fees), add guardrails - reasonable notice periods, a genuine right to exit before changes take effect, and clear processes.
• Balance rights and remedies where possible. If you reserve a right, consider a corresponding right for the other party where feasible.
• Ensure fees are proportionate to the likely loss and explain how they’re calculated.

5) Check Your Processes Match Your Paper

If your terms promise notice and a right to exit on price changes, make sure your systems can deliver that. Fair drafting only helps if your operational processes support it.

6) Train Your Team

Sales and customer success teams often field questions and propose variations. Give them a short playbook on what can and can’t be changed, and how to escalate legal questions early.

7) Get A Legal Review

A targeted review can quickly identify problem areas and suggest wording that satisfies the UCT regime without undermining your commercial goals. Our team regularly conducts a focused UCT review and redraft for standard form contracts, as well as broader consumer law support if you’d like a more holistic check.

Key Documents To Update Now

Every business is different, but these are the templates most commonly affected by the November 2023 changes.

• Terms of Trade: The backbone for many B2B relationships. Review variation, payment, suspension/termination and liability clauses carefully.
• Website Terms and Conditions: Often standard form by design. Ensure renewal, cancellation, and limitation clauses are balanced and clear.
• Subscription Terms (including SaaS): Auto-renewals, price changes and feature updates need clear notice periods and realistic exit rights.
• Customer Contracts: If you issue short-form proposals or order forms that incorporate your standard terms, confirm the linked terms are current and presented transparently before acceptance.
• Privacy Policy: While not a UCT issue, this sits alongside your T&Cs - if you’re refreshing your customer terms, it’s sensible to ensure your Privacy Policy and data-handling promises align with how you actually operate.

When updating, keep a clean version history showing when you changed key terms and how you notified customers. That transparency can be useful if there’s ever a question about what terms applied when.

Key Takeaways

• From 9 November 2023, unfair contract terms are prohibited - not just void - and proposing, using or relying on them can attract significant penalties.
• The “small business” threshold is broader (fewer than 100 employees or turnover under $10m), and contract value thresholds are gone, so the regime now captures many more deals.
• Standard form includes contracts with limited or “tick-box” negotiation; minor tweaks won’t remove you from the UCT regime.
• High-risk clauses include unilateral variations, auto-renewals with limited exit rights, one-sided liability and indemnity clauses, and disproportionate fees.
• Get compliant by auditing your templates, redrafting for fairness and transparency, aligning processes, training your team, and obtaining a targeted legal review.
• Prioritise updates to your core templates such as Terms of Trade, online terms, subscription/SaaS terms and customer contracts, and sense-check related ACL obligations like misleading or deceptive conduct.

If you’d like a consultation on updating your standard form contracts for the November 2023 unfair contract terms changes, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.