Unfair Contract Terms:

Australian businesses often pay attention to contract risk when a dispute has already started. A better approach is to review standard form contracts before they are signed, renewed, rolled over or reissued to customers and suppliers.

 

That is especially important because Australia’s unfair contract terms regime now has real enforcement consequences. The ACCC explains that the law protects consumers and small businesses from unfair terms in standard form contracts. ASIC’s guidance also explains how unfair contract term protections apply to small business contracts for financial products and services.

 

For businesses using repeatable templates — customer terms, supplier agreements, SaaS terms, engagement letters, franchise-adjacent documents, finance documents or platform terms — the practical question is not simply “is this clause enforceable?” It is also: “does this clause create unnecessary legal and commercial risk?”

 

A term may raise concern if it gives one party broad unilateral rights, imposes disproportionate consequences, limits remedies too aggressively, allows one-sided variation, or creates an imbalance that is not reasonably necessary to protect legitimate business interests. The answer always depends on the contract, the parties, the product or service, and the commercial context.

 

The cost problem is that many businesses leave this review too late. If a template has already been used across dozens or hundreds of relationships, fixing the issue may require customer communications, renegotiation, operational changes and dispute management. A pre-renewal review is usually more efficient.

 

This is an area where AI-assisted, lawyer-led work can reduce process waste without reducing legal judgment. AI can help identify repeated clauses, compare contract versions, map one-sided rights, extract renewal and termination provisions, and prepare a first-pass risk table across a contract suite. But the legal assessment still needs a lawyer: whether a term is unfair, whether it is reasonably necessary, and how it should be amended requires judgment, context and risk weighting.

 

For clients, a practical contract review can be structured around five questions:

 

1. Which templates are actually being used?

Many businesses have legacy documents sitting beside updated versions.

 

2. Are the contracts standard form contracts?

The unfair contract terms regime focuses on standard form contracts with consumers and small businesses.

 

3. Which terms create the highest risk?

Common areas include unilateral variation, termination, automatic renewal, indemnities, limitation of liability, suspension rights and broad discretion clauses.

 

4. Can the commercial objective be achieved in a fairer way?

The goal is not to weaken the business position unnecessarily. It is to draft clauses that are defensible and commercially workable.

 

5. What should change before renewal or new rollout?

Prioritise contracts that are high-volume, customer-facing, supplier-critical or connected to regulated products and services.

 

The best review is not a theoretical mark-up. It should produce a usable contract playbook: which clauses to keep, which to amend, which to remove, and how the business team should explain changes when negotiating.

 

For Law Flow, the broader point is simple: efficient contract review is not about replacing lawyers with AI. It is about using AI to reduce repetitive extraction and comparison work so that legal time is focused on judgment, risk allocation and practical drafting.

 

Lower legal cost should come from less waste — not lower standards.

 

Short source list

• ACCC — Contracts and unfair contract term guidance: https://www.accc.gov.au/business/selling-products-and-services/contracts

• ACCC — Compliance and enforcement priorities update 2025–26, including focus on unfair contract terms such as subscription traps: https://www.accc.gov.au/about-us/news/speeches/acccs-compliance-and-enforcement-priorities-update-2025-26-address

• ASIC — Unfair contract term protections for small businesses: https://www.asic.gov.au/about-asic/what-we-do/our-role/laws-we-administer/unfair-contract-term-protections-for-small-businesses/

• ASIC — Unfair Contract Terms reforms commence: https://www.asic.gov.au/about-asic/news-centre/news-items/unfair-contract-terms-reforms-commence/

 

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This article is general information, not legal advice. For advice about your circumstances, contact Law Flow.