Doing the right thing by your customers isn’t just good business - in Australia, it’s the law. The Australian Consumer Law (ACL) includes strong protections against unfair behaviour, including a ban on unconscionable conduct.
If your business negotiates with customers or other small businesses, it’s important to understand how Section 21 of the ACL works in practice. It doesn’t just target “bad actors”. It captures sales processes, pricing tactics, contract terms and negotiation strategies that go too far.
In this guide, we’ll break down what unconscionable conduct is, how regulators and courts assess it, common risk areas for small businesses, and practical steps you can take to stay compliant and build trust with your customers.
What Is Unconscionable Conduct Under Section 21?
Unconscionable conduct is behaviour that’s so harsh, unfair or oppressive that it goes against good conscience. Section 21 of the ACL prohibits unconscionable conduct in trade or commerce in connection with the supply or acquisition of goods or services - and it applies to dealings with consumers and small businesses.
Unlike some parts of the ACL that focus on specific rules (for example, misleading conduct under Section 18), unconscionable conduct is assessed holistically. The regulator (ACCC) and the courts look at the overall circumstances of the transaction and how the parties behaved.
If you’d like a deeper dive into the legal test, we’ve explored it further in our overview of Section 21.
Key Features Of Section 21
- It’s not about whether a deal is simply “good” or “bad” - a hard bargain can be okay. The focus is whether the conduct was against good conscience.
- Courts consider bargaining power, information imbalances, pressure tactics and whether the stronger party exploited vulnerabilities.
- It applies to both written and verbal dealings, including pre-contract negotiations, renewals and variations.
- There is no need to prove intention to act unconscionably; outcomes and context matter.
When Does Section 21 Apply To Businesses?
Unconscionable conduct can occur in many everyday business interactions. Typical scenarios include:
- Pressuring a customer to sign on the spot with confusing or shifting terms.
- Embedding onerous, one-sided clauses in standard form contracts that go beyond what’s reasonably necessary.
- Using inside knowledge of a customer’s vulnerability (e.g. language barriers, limited business experience, urgent financial pressure) to push an unfair deal.
- Withholding key information or creating artificial urgency that deprives the other party of a genuine opportunity to understand and assess the offer.
- Refusing to negotiate on clearly unfair terms where you hold substantially more bargaining power.
Section 21 often overlaps with other areas of the ACL. For example, misleading statements may breach Section 18, and certain promotional claims could also raise concerns under Section 29 (false or misleading representations). A single sales process can trigger multiple issues at once.
How Do Courts Assess Unconscionability?
There’s no single checklist that automatically decides whether conduct is unconscionable, but the ACL sets out factors that can be considered. In plain English, regulators and courts will look at questions like:
- Was there a significant imbalance in bargaining power?
- Did one party rely on the other’s skill, judgment or advice?
- Were terms transparent and clearly explained, or buried in fine print?
- Did the stronger party use undue influence, unfair tactics, or “take-it-or-leave-it” pressure?
- Did the weaker party have a real opportunity to seek independent advice?
- Were prices, fees and key risks disclosed in a way a reasonable person would understand?
- Did the conduct go beyond what’s reasonably necessary to protect legitimate business interests?
A helpful way to think about it: would a fair-minded business owner consider the process and outcome to be reasonable in the circumstances? If not, it may cross the line.
Many small businesses rely on standard form contracts or online terms. That’s fine - but if your template includes one-sided provisions that unfairly tilt the playing field, you could face issues under both Section 21 and Australia’s unfair contract terms regime.
As a starting point, consider a targeted review of your standard form terms through a UCT review and redraft to reduce risk and keep your documents aligned with ACL expectations.
Transparency And Disclosures
Transparency is a key theme in both unconscionability and misleading conduct. Make sure pricing, fees and limitations are easy to find and understand. If you’re promoting a deal, ensure it aligns with Australia’s advertised price laws and avoid drip pricing that surprises customers at checkout.
Practical Examples For Small Businesses
Unconscionable conduct is often easiest to understand with practical examples. These scenarios show how normal business practices can slide into risky territory if not handled carefully.
“Sign Now Or Lose The Deal” Sales Tactics
Creating urgency is common in sales, but insisting a customer sign immediately without a fair chance to read the contract, ask questions or seek advice can be problematic - especially where the agreement includes unusual or burdensome terms. A better approach is to provide a short cooling-off period or at least make it clear the customer can take the document away for review.
Unclear Or One-Sided Standard Terms
Terms that heavily limit your liability while imposing strict obligations on the customer may raise concerns, particularly if they’re not clearly highlighted. Balance your terms, explain key risks, and make sure clauses that protect your legitimate interests are reasonably necessary and transparent.
Exploiting Vulnerability
If you know (or ought to know) that a customer has limited English, limited financial literacy, or is under severe time pressure, adjust your process: use plain-English summaries, provide translations where practical, and offer time for independent advice. Using the situation to push a deal through quickly may be viewed as unconscionable.
Bundled offers, subscription add-ons or extended warranties should be presented clearly. Overstating benefits, downplaying exclusions, or using confusing fee structures can lead to both misleading conduct and unconscionability concerns. Where applicable, have a straightforward Warranties Against Defects Policy and make it accessible.
How To Comply: Practical Steps To Build Fair Trading Practices
Good compliance is mostly about good process. Here’s a practical framework you can apply across your customer journey.
1. Map Your Sales Journey
Start by mapping how a customer moves from first contact to signing and post-sale support. Identify points where information is provided, questions are answered, and decisions are made.
- Are prices and fees visible and consistent?
- Do customers receive a clear, concise summary of key terms before committing?
- Can they reasonably compare options without undue pressure?
2. Make Key Terms Clear And Accessible
Pull important limitations and risks out of the fine print. Use headings, short paragraphs, and callouts to highlight fees, renewal periods, cancellation processes and any automatic rollovers. If you trade online, pair your product or service pages with clear Terms of Use and a visible Privacy Policy.
3. Balance Your Standard Terms
Review your contract templates to ensure they’re proportionate and necessary to protect your legitimate interests. One-sided indemnities, unlimited unilateral variation rights, or excessive termination fees can be red flags. If you haven’t refreshed your templates in a while, it’s wise to get tailored guidance from a consumer law specialist.
4. Train Your Team
Frontline staff should know what they can and can’t say, how to handle vulnerability, and how to escalate tricky situations. Provide scripts and FAQs for common questions, and build in checks (for example, manager sign-off for unusual discounts or custom terms) to avoid accidental overreach.
5. Offer Time For Advice And Questions
Where the value is significant or the product is complex, offer a clear window for customers to review the terms and seek independent advice. This shows you’re not using pressure tactics and helps avoid misunderstandings later.
6. Document Your Process
Keep records of disclosures made, sales scripts, summaries provided, and any negotiations. Good records can help demonstrate your approach was fair if there’s ever a complaint.
7. Build A Simple Issue Resolution Path
Make complaints handling easy and responsive. Many disputes escalate because customers feel ignored or trapped. A well-structured internal process, plus clear information about external pathways, goes a long way to reducing risk.
Common Risk Areas To Watch
Some practices attract regular ACL scrutiny. If any of these apply to your business, consider extra care and oversight.
- Drip pricing and upsells: All unavoidable fees should be included in the displayed price or clearly disclosed up front to align with advertised price laws.
- Auto-renewals and lock-in periods: Ensure renewal notices are clear and cancellation steps are simple and fair.
- High-pressure sales environments: For door-to-door, telemarketing or in-home sales, extra care is needed. Provide written summaries and a chance to withdraw in line with consumer expectations.
- Vulnerable customers: Where vulnerability is apparent, slow down and adjust your process to ensure genuine, informed consent.
- Standard form contracts: Review for fairness; consider a UCT review where you regularly use templates with individuals or small businesses.
What If You’ve Experienced Unconscionable Conduct?
If you believe another business acted unconscionably toward you, there are several pathways you can explore. The right approach depends on the facts, your goals and time constraints.
Self-Help And Early Resolution
- Gather documents: proposals, emails, call notes, promotional materials, and the contract (if signed).
- Write a clear summary of what happened, focusing on specific conduct that felt unfair or exploitative.
- Contact the business with a concise request to resolve the issue (refund, contract variation, unwinding the deal).
Regulatory And Legal Options
- Regulatory complaint: You can raise concerns with the ACCC or your state fair trading body. While regulators don’t resolve every individual dispute, systemic issues or serious conduct may be investigated.
- Negotiation and settlement: Many matters resolve through commercial negotiation, sometimes supported by a lawyer’s letter.
- Court action: In serious cases, remedies can include voiding the contract, refunds or damages. Get advice early to weigh prospects, costs and timing.
Because unconscionability can overlap with other ACL breaches - for example, misleading conduct or false representations under Section 29 - it’s often helpful to get holistic legal guidance on your options and prospects before taking further steps.
Documents And Processes That Support Compliance
Clear, balanced paperwork and simple processes make it much easier to stay on the right side of the ACL. Consider whether you have the following in place and tailored to your offering.
- Customer Terms or Service Agreement: Plain-English, balanced terms that clearly explain pricing, inclusions, exclusions and cancellation.
- Sales Summaries: One-page summaries of key terms for higher-value or complex products, provided before signature.
- Warranties Policy: Where applicable, a compliant Warranties Against Defects Policy that’s easy to find and understand.
- Website Legal Pack: Clear Terms of Use and a visible Privacy Policy for online sales or bookings.
- Standard Form Contract Review: Periodic checks for fairness and compliance (a targeted UCT review is a practical way to do this).
- Sales And Complaints Procedures: Internal scripts, training and escalation steps to avoid pressure tactics and resolve issues early.
If you’re unsure where to start, getting tailored advice from a consumer law specialist or booking an ACL consultation can help you prioritise the highest-impact changes quickly.
How Unconscionability Interacts With Other ACL Duties
Unconscionable conduct rarely appears in isolation. It often sits alongside:
- Misleading or deceptive conduct: Claims and omissions that could breach Section 18.
- False or misleading representations: Specific claims about price, quality or benefits, captured by Section 29.
- Unfair contract terms: One-sided clauses in standard form contracts that go beyond what’s reasonably necessary - address these with a focused UCT review.
Treating your sales process and contract templates as a package - rather than checking each law in isolation - is the easiest way to stay compliant and deliver a positive customer experience.
Key Takeaways
- Section 21 of the ACL bans unconscionable conduct - behaviour that’s so unfair or oppressive it goes against good conscience in trade or commerce.
- Courts look at context: bargaining power, transparency, pressure tactics, information gaps and whether vulnerabilities were exploited.
- Risk areas include high-pressure sales, unclear pricing, one-sided standard terms, auto-renewals and dealings with vulnerable customers.
- Practical compliance steps include mapping your sales journey, making key terms clear, balancing your templates, training staff and documenting disclosures.
- Support compliance with clear customer terms, a compliant warranties policy, website legal documents and periodic reviews for unfair contract terms.
- Unconscionability often overlaps with misleading conduct and false representations - take a holistic approach to your ACL compliance.
If you’d like a consultation about unconscionable conduct and your ACL obligations, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
