5 June 2009

The National Unfair Contract Terms Law

The Consumer Affairs Minister, Chris Bowen MP, today outlined the details of the unfair contract terms law.

"Last year, COAG agreed that Australia should have a national unfair contract terms law and the Government is committed to ensuring that consumers and small businesses can access protection from unfair contract terms," Mr Bowen said.

"This new unfair contract terms law will give all Australian consumers access to protection from unfair contract terms in standard-form contracts.

"The unfair contract terms law is the result of a long policy review and development process undertaken by the Australian Government in close consultation with the States and Territories.

In May the Consumer Affairs Minister released the draft unfair contract terms provisions for public comment to ensure that all stakeholders had the opportunity to express their views.

The reforms were agreed by COAG on 2 October 2008 and are based on detailed policy proposals developed by the Ministerial Council on Consumer Affairs in August 2008. They were recommended by the Productivity Commission as part of its comprehensive review of Australia's consumer policy framework.

"The Government has listened to the views of stakeholders, and has made some changes to the proposed law to address key concerns," Mr Bowen said.

"The Government will be referring the legislation to the Senate Economics Committee, giving another opportunity for consumer and business groups to have their say.

"The Government will work closely with both business and consumer groups through that Senate inquiry to make any further necessary refinements to ensure the law strikes a balance between targeting unfair conduct that leaves consumers vulnerable and inserting safeguards that ensures businesses can pursue their legitimate business interests."

The refinements to the unfair contract terms provisions include:

  • an exclusion of a standard-form contract where the upfront price payable for the services (including financial services), good or land supplied under the contract exceeds $2 million;
  • an exclusion of standard-form contracts that are shipping contracts, and are the constitutions of companies, managed investment schemes or other kinds of bodies.

"As I announced on the 17 February 2009, the Bill that will introduce these reforms will also include new civil pecuniary penalties, enforcement powers and options for consumer redress, which were agreed by COAG in October 2008," Mr Bowen said.

"This is the first stage of the implementation of a new Australian Consumer Law, which will for the first time introduce a single national consumer law that applies to all Australians, providing consumers with more certainty and reducing compliance costs for business."

5 June 2009


Key features of the national unfair contract terms law

The national unfair contract terms provisions include the following key features:

  • it will be implemented by the ACL, generally, and as part of the Australian Securities and Investments Commission Act, in respect of financial services;
  • it will relate only to standard-form contracts;
  • a term is 'unfair' when it causes a significant imbalance in the parties' rights and obligations arising under the contract and it is not reasonably necessary to protect the legitimate interests of the supplier;
  • a court must have regard to any detriment or substantial likelihood of detriment, the transparency of the term and the contract as a whole in determining whether a term is ‘unfair’;
  • certain terms will not be able to be challenged under these provisions which relate to:
    • the main subject matter of the standard-form contract;
    • the upfront price payable under the standard-form contract;
    • terms required, or expressly permitted, by a law of the Commonwealth or a State or Territory';
  • a non-exhaustive, indicative 'grey-list' of types of terms that may considered to be unfair; and
  • a power to prohibit terms in a standard-form contract that are considered to be unfair in all circumstances.

Application and commencement

The new unfair contract terms law will apply to all:

  • new standard-form contracts entered into on or after the commencement date; and
  • contracts that are renewed or varied on or after the commencement date, to the extent of the renewal or variation in respect of conduct taking place after the date of renewal or variation.

The Government has announced its intention that the new law should commence on 1 January 2010.


The Government consulted on the Australian Consumer Law reforms more generally in February and March 2009, and the unfair contract terms provisions were exposed in May this year.

The Treasury received 102 submissions in response to the February consultation and, in May, Treasury received nearly 100 more submissions on the exposure draft unfair contract terms provisions.