# LAW-0001 - Unfair contract term classification

*Benchmarking hypothetical, not legal advice. Law stated as at FY2025-26 (Commonwealth).*

## Answer

**(a)** Classification: unfair

**(b)** Controlling statute: the Australian Consumer Law (ACL), which is Schedule 2 to the Competition and Consumer Act 2010 (Cth). The section that sets out the test for whether a term is unfair is **section 24 of the ACL**.

## Working

### Why the unfair contract terms regime applies

The prompt stipulates the contract is both a **consumer contract** and a **standard-form contract**. Those are the two gateway requirements for the unfair contract terms (UCT) regime in Part 2-3 of the ACL (ss 23-28). A term of such a contract is **void** if it is unfair (s 23(1)). The consumer here had no opportunity to negotiate the wording, which is consistent with the standard-form characterisation (and reflects the matters a court considers under s 27 when deciding if a contract is standard form).

### The test (s 24)

A term is **unfair** if all three limbs of s 24(1) are met:

1. **(a)** it would cause a **significant imbalance** in the parties' rights and obligations arising under the contract;
2. **(b)** it is **not reasonably necessary** to protect the legitimate interests of the party who would be advantaged by the term; and
3. **(c)** it would cause **detriment** (financial or otherwise) to a party if it were applied or relied on.

Under s 24(4), limb (b) is presumed not satisfied unless the advantaged party (the supplier) proves otherwise. The court must take into account the extent to which the term is **transparent** and the **contract as a whole** (s 24(2)).

The **grey list** in **s 25** gives non-exhaustive examples of the kinds of terms that may be unfair. Two of them map directly onto this clause:

- a term that permits one party (but not another) to **vary the terms** of the contract (s 25(1)(d)); and
- a term that permits one party unilaterally to **vary the upfront price** payable without the other party's right to terminate (s 25(1)(g) / (h)).

### Applying the test to the clause

> "The supplier may vary the monthly fee payable by the consumer at any time, in any amount, at the supplier's sole discretion, without notice. The consumer has no right to terminate the contract if the fee is varied."

- **Significant imbalance (s 24(1)(a)):** The power runs one way only. The supplier may change the price at any time, in any amount, at sole discretion and without notice, while the consumer gets no corresponding right and is expressly stripped of the ability to exit. That is a clear, one-sided imbalance in the parties' rights.
- **Not reasonably necessary (s 24(1)(b)):** A supplier may have a legitimate interest in adjusting prices over time, but an **unfettered, no-notice, no-exit** discretion goes well beyond what is reasonably necessary to protect that interest. A term reasonably tailored to that interest would, for example, give notice and let the consumer terminate before an increase took effect. The presumption in s 24(4) puts the onus on the supplier, and on these facts it is not discharged.
- **Detriment (s 24(1)(c)):** If relied on, the consumer can be charged an arbitrarily higher fee, without warning, and cannot escape the contract - plainly detrimental, financially and otherwise.

Two features make this an especially strong case for unfairness: the variation power is **uncapped and notice-free**, and the clause **removes the right to terminate**. The removal of the exit right is what stops the "upfront price" carve-out in **s 26** from saving it: s 26 takes the genuine upfront price out of review, but it does not protect a discretionary, ongoing, unilateral **variation** mechanism of the kind in this clause.

All three limbs of s 24 are satisfied, and the clause squarely matches the s 25 examples. It is therefore **unfair**, and would be **void** under s 23.

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## Note on approach

The task is a self-contained Australian-law hypothetical with no `inputs/` directory, so the analysis is built entirely from the clause and the stated assumptions (consumer contract + standard-form contract). The classification follows from running the clause through the three-limb statutory test, and the statute/section answer identifies the controlling instrument (the ACL in Schedule 2 to the Competition and Consumer Act 2010 (Cth)) and the section that houses the test (s 24), with s 23 (void), s 25 (grey-list examples), and s 26 (upfront-price carve-out) cited as the supporting provisions. This is a benchmarking exercise, not legal advice.