# LAW-0001 - Unfair Contract Terms Analysis

## Answers

**(a)**

Classification: unfair

**(b)**

Controlling statute: *Competition and Consumer Act 2010* (Cth), Schedule 2 (the *Australian Consumer Law*), **section 24**.

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## Working

### Legislative framework

The unfair contract terms (UCT) regime in Australia is set out in the *Australian Consumer Law* (ACL), which is Schedule 2 to the *Competition and Consumer Act 2010* (Cth). The regime was substantially strengthened by the *Treasury Laws Amendment (More Competition, Better Prices) Act 2022* (Cth), which took effect on 9 November 2023 and is the law applicable for FY2025-26.

The central test is in **ACL s 24**, which provides that a term of a consumer contract or small business contract is *unfair* if:

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

In assessing whether a term is unfair, a court must also take into account the contract as a whole (s 24(2)).

Section 25 provides a non-exhaustive list of examples of terms that may be unfair, including (at s 25(1)(d)) a term that permits one party to vary the price without giving the other party the right to terminate.

### Application to the clause

**Limb 1 - Significant imbalance.** The clause gives the supplier unconstrained power to increase the monthly fee by any amount, at any time, with no notice. The consumer bears all of the price risk and the supplier bears none. This plainly creates a significant imbalance.

**Limb 2 - Reasonably necessary.** There is no legitimate commercial reason that requires a right to vary price without limit, without notice, and without any consumer exit right. A proportionate clause (for example, a capped variation with reasonable notice and a corresponding termination right) would protect any legitimate interest the supplier might have. The clause as drafted goes well beyond what is reasonably necessary.

**Limb 3 - Detriment.** If applied, the clause exposes the consumer to unbounded cost increases with no exit. This is clear financial detriment.

The clause also falls squarely within the s 25(1)(d) example (varying the price and extinguishing the other party's termination right), which the ACL treats as paradigmatic of potential unfairness.

All three limbs of s 24 are satisfied. The clause is unfair.

### Consequence

Under the amended regime (from 9 November 2023), an unfair term in a standard-form consumer contract is **void** (s 23(1)). The ACCC and state/territory consumer agencies may also seek civil penalties against the supplier for including or relying on the term (ss 23A-23E, as inserted by the 2022 amendments).

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## Approach note

I applied the three-part test in ACL s 24, cross-checked against the s 25 indicative list (particularly s 25(1)(d)), and noted the 2022 reform that replaced the previous "voidable if a court so declares" model with direct voidness plus penalty exposure. No prior conversation or external references were used.