Breach of Unfair Contract Terms

Breach of Unfair Contract Terms: Understanding Your Legal Rights

Contract agreements are a fundamental part of business transactions. They serve as a legally binding agreement between two parties, outlining the terms and conditions of a particular arrangement. However, in some cases, one party may include unfair or unreasonable terms in the contract, which can lead to a breach of contract and potential litigation.

What is an Unfair Contract Term?

Unfair contract terms are those that create an imbalance of power between the two parties and can leave one at a disadvantage. Examples of unfair contract terms include clauses that limit liability, impose excessive fees or penalties, or provide unequal access to information.

Under the law, these types of terms are considered to be unfair and are prohibited. The Competition and Consumer Act of 2010 (CCA) and the Australian Securities and Investments Commission Act of 2001 (ASIC Act) define the requirements for what is considered an unfair term in a contract.

What Happens in the Event of a Breach of Unfair Contract Terms?

If a contract includes an unfair term and a breach occurs, the impacted party has the legal right to take action. The first step is to review the contract terms and determine whether the breach constitutes an unfair contract term.

If the breach is found to be unfair, the impacted party can take action to either seek compensation for any loss suffered or apply to have the unfair term declared void. This can be done by going through the courts or via alternative dispute resolution methods such as mediation or arbitration.

Enforcing Unfair Contract Term Protections

In 2020, the Australian government introduced new protections under the Australian Consumer Law (ACL) to strengthen the rights of consumers and small businesses when it comes to unfair contract terms. These protections include increased financial penalties for businesses found to be in breach of unfair contract terms and additional powers for the Australian Competition and Consumer Commission (ACCC) to take action against businesses engaged in unfair practices.

These new regulations aim to ensure better protection for consumers and small businesses in their contractual dealings with larger corporations.


Unfair contract terms can have far-reaching consequences for both parties involved. As a business owner or consumer, it is essential to understand your legal rights and the protections afforded to you under Australian law. If you suspect that a contract term may be unfair, seek legal advice before signing any agreement. By doing so, you can avoid potential litigation and ensure that your interests are protected.