What Makes A Contract Term Unfair?

What Makes A Contract Term Unfair?

Whether it’s to provide a service, gain employment or even just downloading software, it is not unlikely that you would have selected “I agree” to terms of agreement without thinking too hard about it. However, sometimes the terms of a contract may be deemed to be unfair to the signer and could cause greater issues. 

Only a court can determine whether or not a contract’s term is unfair. For example, a term in a standard form  small business contract is “unfair” if it:

  • would cause a significant imbalance in the parties’ rights and obligations arising under the contract
  • is not reasonably necessary to protect the legitimate interests of the party that would benefit from the term, or
  • would cause detriment (financial or otherwise) to a small business if it were to be applied or relied on.

The court must also determine the transparency of a term when determining the unfairness of a term. A term is considered to be transparent if it is:

  • Legible
  • Expressed in reasonably plain language
  • Presented clearly
  • Readily available to any party that may be affected by the term. 

The term may not be transparent if it is hidden in the fine print or written in complex or legal language. A transparent term may still be considered an unfair term, regardless of the level of transparency in play. 

The court must also determine and assess the fairness of the term in the context of the contract as a whole. 

To ensure that your business contracts are compliant and are not at risk of having terms that are deemed unfair, ensure that you speak with a trusted legal professional today. 


If you believe the matters discussed above are relevant to your business, please contact Darren Smith of our office to discuss further.

Darren is a Chartered Accountant with extensive experience, including working in the big 4 and medium sized firms before becoming a partner of a city based firm in 2000.

He has gained much experience and has extensive knowledge in providing business and taxation advice, superannuation planning, negotiation of sales and acquisitions of businesses and property development. His client base covers a wide range of industry groups.

Darren works with business owners to grow their businesses and create personal wealth within and outside of their business.

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