Avoiding Unfair Contract Terms in Your Service Agreements

Since November 2023, including unfair contract terms in standard form contracts is not just unenforceable, it’s illegal. That means service providers need to be extremely careful about how they draft their client agreements.

This blog explains what constitutes an unfair contract term and how to ensure your contract is compliant with the Australian Consumer Law.

What Is an Unfair Contract Term?

A term is considered unfair if it:

• Causes a significant imbalance in rights and obligations

• Is not reasonably necessary to protect your business interests

• Would cause detriment to the client if relied on

Common examples in service contracts include:

• Clauses that allow the business to terminate or vary the agreement unilaterally

• One-sided indemnities or release clauses

• Restrictions on the client’s ability to terminate or obtain a refund

If your contract contains terms like these, they may be unlawful.

Who Does This Apply To?

These changes apply to Australian businesses, including small businesses providing standard form contracts – which covers most Australian service providers.

A contract is considered standard form if it’s presented on a ‘take it or leave it’ basis with little opportunity for negotiation.

This means most online coaches, consultants, freelancers, digital marketers, and agencies are affected.

How to Fix It

You don’t have to remove every protective clause, but you do need to ensure they’re fair, balanced, explained clearly and that an opportunity for negotiation is provided to your client. The goal is to provide certainty, not to unfairly shift risk onto the client.

Things to review include:

• Termination clauses

• Refund and cancellation policies

• Scope variation and change request processes

Final Thoughts

Unfair contract terms can lead to penalties, complaints, and reputational damage. If you’re unsure whether your contract meets the new standard, we can assist you with a full review and advice on necessary updates or changes.

Alternatively, you can implement lawyer drafted templates to reduce your risk of falling under the unfair contracts net. Check out our contract templates or Book a strategy call for a personalised compliance

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This blog is intended for general information purposes only and does not constitute legal advice. The content is based on Australian law and may not be current at the time you read it. Legal requirements may vary depending on your circumstances. Always seek independent legal advice tailored to your specific situation before acting on any information provided.