Unfair Contract Terms Checklist

From 9 November, 2023, sweeping reforms of the unfair contract terms regime will commence.

This checklist aims to help you assess your standard form contracts and identify any terms that could be considered ‘unfair’ under the new regime.

It’s important to note that this checklist is not exhaustive and should not replace legal advice. If you have any specific legal questions about the new regime, please contact us.

 Does my credit documentation include unfair terms?

Section 24 of the Australian Consumer Law identifies three elements as to whether a contractual term is unfair.

Those key elements are that the term:

1. 1. causes significant imbalance in the parties’ rights and obligations under the contract (section 24(1)(a));
   2. is not reasonably necessary in order to protect the legitimate interest of the party who would be advantaged by the term (section 24(1)(b)); and
   3. would cause detriment (financial or otherwise) to a party if it were to be applied or relied upon (section 24(1)(c)).

What is an ‘unfair term’?

Section 25 of the Australian Consumer Law provides guidance as to what kind of terms may be unfair.

Such terms include:

1. 1. a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract;
   2. a term that permits, or has the effect of permitting, one party (but not another party) to terminate the contract;
   3. a term that penalises, or has the effect of penalising, one party (but not another party) for a breach or termination of the contract;
   4. a term that permits, or has the effect of permitting, one party (but not another party) to vary the terms of the contract;
   5. a term that permits, or has the effect of permitting, one party (but not another party) to renew or not renew the contract;
   6. a term that permits, or has the effect of permitting, one party to vary the upfront price payable under the contract without the right of another party to terminate the contract;
   7. a term that permits, or has the effect of permitting, one party unilaterally to vary the characteristics of the goods or services to be supplied, or the interest in land to be sold or granted, under the contract;
   8. a term that permits, or has the effect of permitting, one party unilaterally to determine whether the contract has been breached or to interpret its meaning;
   9. a term that limits, or has the effect of limiting, one party’s vicarious liability for its agents;
   10. a term that permits, or has the effect of permitting, one party to assign the contract to the detriment of another party without that other party’s consent;
   11. a term that limits, or has the effect of limiting, one party’s right to sue another party;
   12. a term that limits, or has the effect of limiting, the evidence one party can adduce in proceedings relating to the contract;
   13. a term that imposes, or has the effect of imposing, the evidential burden on one party in proceedings relating to the contract; and
   14. a term of a kind, or a term that has an effect of a kind, prescribed by the regulations.