# LAW-0001 - Unfair contract terms classification

*This is a benchmarking hypothetical, not legal advice. Law as at FY2025-26 (Commonwealth).*

## (a) Classification

Classification: unfair

## (b) Controlling statute and section

- **Statute:** The Australian Consumer Law (ACL), being Schedule 2 to the *Competition and Consumer Act 2010* (Cth).
- **Section that sets out the test:** **section 24** of the ACL ("Meaning of unfair").

(For services supplied by an entity regulated under the financial services regime, the equivalent test sits in s 12BG of the *Australian Securities and Investments Commission Act 2001* (Cth). For a general online subscription business as described, the controlling provision is ACL s 24.)

## Working

**The regime.** Where a contract is a consumer contract and a standard-form contract (both assumed here), Part 2-3 of the ACL applies. Under **s 23**, a term of such a contract is **void** if it is unfair. The **test** for what makes a term unfair is in **s 24**.

**The s 24 three-limb test.** A term is unfair if:
1. it would cause a **significant imbalance** in the parties' rights and obligations arising under the contract;
2. it is **not reasonably necessary** to protect the legitimate interests of the party advantaged by the term (s 24(4) presumes it is not, unless that party proves otherwise); and
3. it would **cause detriment** (financial or otherwise) to a party if applied or relied on.

In assessing this, the court considers the transparency of the term and the contract as a whole (s 24(2)).

**Applying the test to the clause.** The clause lets the supplier "vary the monthly fee... at any time, in any amount, at the supplier's sole discretion, without notice," and simultaneously denies the consumer any right to terminate if the fee is varied.

- *Significant imbalance:* The supplier alone controls the price - the central commercial term - with unlimited, one-sided discretion, while the consumer has no reciprocal right and no exit. This is a substantial imbalance favouring the supplier.
- *Not reasonably necessary:* An unfettered, no-notice, no-cap discretion goes well beyond any legitimate interest in adjusting prices (which could be served by reasonable notice plus a right to terminate). The supplier bears the onus under s 24(4) and is unlikely to discharge it on these facts.
- *Detriment:* The consumer is exposed to unannounced, uncapped price rises with no ability to walk away - clear financial detriment.

**The s 25 grey-list confirms this.** Section 25 of the ACL gives a non-exhaustive list of **examples** of terms that *may* be unfair. This clause squarely matches two of them:
- s 25(1)(d): a term that permits one party (but not another) **to vary the terms** of the contract;
- s 25(1)(j) / (k): a term that permits one party **to vary the upfront price** payable without the other having a right to terminate; and the related example of a term permitting only one party to avoid or limit performance / terminate.

It also conflicts with the absence of a consumer termination right (cf. the example at s 25(1)(b), a term that permits one party but not another to terminate). The s 25 list does not itself make a term unfair - it points to terms that should be tested against s 24 - but it strongly signals this clause's character.

**Conclusion.** Measured against the s 24 test, the clause causes a significant imbalance, is not reasonably necessary to protect the supplier's legitimate interests, and would cause detriment to the consumer. It is therefore **unfair**, and under s 23 it would be **void** (with civil penalty exposure for proposing/applying/relying on an unfair term following the November 2023 reforms).

## Approach

I identified this as an Australian Consumer Law unfair-contract-terms question (Part 2-3 of the ACL). I located the operative test in ACL s 24, confirmed the void consequence in s 23, and cross-checked the clause against the s 25 grey-list examples (unilateral variation of terms and of the price, and one-sided termination rights). The clause's combination of sole-discretion, no-notice, uncapped price variation plus removal of the consumer's exit right satisfies all three s 24 limbs, so it is classified unfair. I noted the financial-services analogue (ASIC Act s 12BG) for completeness, while confirming ACL s 24 is the controlling provision for a general online subscription business.