Unfair con­tract terms in out­dat­ed stan­dard form con­tracts could cost you a fine of $50 mil­lion (Com­pa­nies) or $2.5 mil­lion (Indi­vid­u­als)

If you have not reviewed your stan­dard form con­struc­tion con­tracts since 9 Novem­ber 2023 (when the amend­ed Com­pe­ti­tion and Con­sumer Act 2010 (Cth) – Sched­ule 2 (ACL) became effec­tive), you could be at risk of any/​all unfair con­tract terms being declared void and hav­ing to pay a penalty. 

This means that:

• Any stan­dard form con­tract exe­cut­ed after 9 Novem­ber 2023 must com­ply with the ACL
• EACH term found to be unfair by a court or tri­bunal and EACH instance of use includ­ing with par­ties not involved in the sub­ject of the dis­pute will be con­sid­ered its own sep­a­rate con­tra­ven­tion of the ACL[1]
• EACH unfair term will not be bind­ing on the par­ties (the remain­der of the con­tract which is fair remains enforce­able and binding)
• If that unfair term is relied upon after being declared unfair, the par­ty using the unfair term will be in con­tin­u­ous breach of the ACL.

The Aus­tralian Com­pe­ti­tion & Con­sumer Com­mis­sion who enforces the ACL ear­li­er this year pub­lished its Com­pli­ance and enforce­ment pri­or­i­ties | ACCC for ²⁰²⁵⁄₂₆. One of the ACC­C’s pri­or­i­ties list­ed is that of elim­i­nat­ing unfair con­tract terms in small busi­ness con­tracts and NSW stra­ta schemes. Under the new stra­ta law reforms[2] a key change is that these pro­vi­sions of the ACL will be extend­ed to con­tracts with own­ers cor­po­ra­tions and asso­ci­a­tions[3] from 1 July 2025[4]. 

The ACL will apply to new con­tracts, renewed con­tracts and new or var­ied terms added to exist­ing con­tracts entered with own­ers cor­po­ra­tions and com­mu­ni­ty asso­ci­a­tions from 1 July 2025. Read more on this at the Guide to 2025 stra­ta law changes | NSW Gov­ern­ment and Own­ers Corporations/​Asso­ci­a­tions now sub­ject to Unfair Con­tract Terms.

What are some of the penal­ties that can be imposed by the ACCC?

• Fines – not more than the greater of:
  • Max­i­mum $50 million
  • If:
    • Deter­minable, 3 times the val­ue of the ben­e­fit derived either direct­ly or indi­rect­ly by that unfair term (this extends to each time the con­tract and clause has been used) or
    • Not deter­minable, 30% of the adjust­ed turnover dur­ing the peri­od that the unfair con­tract term was used (this extends to each time the con­tract and clause has been used) [5]
• In addi­tion to fines:
  • All instances of use/​all con­tracts includ­ing non-par­ties to the dispute
    • Term will be declared void (remain­der of con­tract remains in force if pos­si­ble) or varied
    • Can be ordered to refund mon­ey or return prop­er­ty to the oppo­site party
  • Injunc­tion to restrain a par­ty using the term
  • Com­pen­sa­tion
  • Redress to non-par­ty to the dis­pute who also signed a sim­i­lar contract

When does this apply?

• When one of the par­ties is a small busi­ness, an own­ers cor­po­ra­tion or an association
• The con­tract involves the sup­ply of goods or ser­vices, or a sale or grant of an inter­est in land
• Is a stan­dard form con­tract eg. Mas­ter Builders Asso­ci­a­tion stan­dard form con­tract (amend­ed or una­mend­ed), or Stan­dards Aus­tralia stan­dard form con­tract (amend­ed or una­mend­ed), or tem­plate bespoke con­tract used reg­u­lar­ly by one party

Who is a small busi­ness?[6]

• Less than 100 employ­ees (part­time employ­ees are counted)
• Turnover less than $10 million

What makes a con­tract a stan­dard form contract?

• If one par­ty alleges it is a stan­dard form con­tract, then it is pre­sumed as such until proved otherwise
• Pre­vi­ous use of a sim­i­lar contract
• Pre­pared before dis­cus­sions start­ed between the parties
• A con­tract may still be deter­mined to be a stan­dard form con­tract even if:
  • There was an oppor­tu­ni­ty to nego­ti­ate but changes are minor/​insubstantial
  • There is an oppor­tu­ni­ty to select from a range of terms/​options

What does this mean for con­struc­tion contracts?

• Types of con­tracts affect­ed by these changes in the ACL:
  • Stra­ta build­ing reme­di­al work con­struc­tion contracts
  • Con­struct only con­tracts (head con­tracts and subcontracts)
  • Design and con­struct contracts
  • Con­sult­ing agreements
  • Super­in­ten­den­cy agreements
  • Design agree­ments such as archi­tects agreements
  • Cer­ti­fi­er engage­ment agreements
• Review, nego­ti­ate and amend:
  • Stan­dard form indus­try con­tracts eg. Mas­ter Build­ings Asso­ci­a­tion, Aus­tralian Stan­dards, Aus­tralian build­ing indus­try con­tracts, Aus­tralian Insti­tute of Architects
  • Bespoke con­tracts, spe­cial con­di­tions and vari­a­tions to stan­dard form con­tracts pre­pared before 9 Novem­ber 2023

What you should already be doing to ensure com­pli­ance with the ACL?

• Elim­i­nate and do not intro­duce an unfair term into your stan­dard form contract
• Embark on mean­ing­ful nego­ti­a­tions of the con­tract terms, keep­ing a record to show nego­ti­a­tion in earnest between the parties
• Ensure all terms are bal­anced and fair, or serve a legit­i­mate inter­est of the par­ty who is being pro­tect­ed by that con­trac­tu­al term
• Send out the con­tract to the par­ties with suf­fi­cient time to con­sid­er and mean­ing­ful­ly nego­ti­ate the terms
• More decisions/​assessments by the super­in­ten­dent dur­ing the con­struc­tion phase/​contract admin­is­tra­tion should be built into your stan­dard form con­tract terms
• Doc­u­ments must be pro­vid­ed to and access for site inspec­tion must be pro­vid­ed to the con­trac­tor and can­not be a gen­er­al oblig­a­tion on the con­trac­tor to have knowl­edge based on what is publicly/​readily avail­able to the con­trac­tor about the site
• Time bars and with­hold­ing pay­ments in cer­tain instances are gen­er­al­ly con­sid­ered unfair unless there is jus­ti­fi­ca­tion for these to be included

These changes in the ACL have sig­nif­i­cant­ly increased the risk for par­ties con­tract­ing in the con­struc­tion indus­try. There exists an increased the like­li­hood of a term in a stan­dard form con­tract being con­test­ed as unfair, with the poten­tial for that term if declared unfair to attract severe penal­ties. If you have not exam­ined your stan­dard form con­tracts or spe­cial con­di­tions, this should be done as a priority.

Swaab has an expe­ri­enced team of lawyers spe­cialised in con­struc­tion and stra­ta law to assist with updat­ing your stan­dard form contracts. 

Helen Kow­al, Part­ner | Swaab is our spe­cial­ist part­ner in stra­ta, con­struc­tion and prop­er­ty law. 

Mark Glynn, Part­ner | Swaab part­ner spe­cialised in front end con­struc­tion law.

[1] sec­tion 2B ACL

[2] sched­ule 3 Stra­ta Schemes Leg­is­la­tion Amend­ment Act 2025 No 14 (NSW)

[3] asso­ci­a­tion means a com­mu­ni­ty asso­ci­a­tion, precinct asso­ci­a­tion or neigh­bour­hood asso­ci­a­tion in the Com­mu­ni­ty Land Man­age­ment Act 2021(NSW)

[4] sec­tion 32A Fair Trad­ing Act 1987 No 68 (NSW)

[5] sec­tion 224 ACL

[6] sec­tion 23(4) ACL