Contracts

When you buy products or services from a trader, you are entering into a contract. Before you do, make sure you understand what you are agreeing to.

What is a contract?

A contract is an agreement made between two or more parties that is legally enforceable. Contracts can be written or verbal.

A contract arises when one party makes an offer and the other party communicates an intention to accept it.

You could be entering a contract by:

  • signing a document
  • selecting a product in a shop and paying for it at the check-out counter
  • clicking on an ‘I agree’ button on a web page.

It is unlawful for businesses to force or coerce you into entering a contract.

Terms and conditions

Contracts have terms and conditions which set out the rights and responsibilities of each party to the contract.

Make sure you read and understand the terms and conditions of a contract before you accept it. If you are unsure, seek legal advice.

While you may have the opportunity to negotiate before you agree, it is common for you to be offered the same or a similar contract as everyone else. This is known as a standard form contract. There are laws to protect you from unfair contract terms in standard form consumer contracts where you have little or no opportunity to negotiate with the trader.

Unfair contract terms

There are laws protecting consumers from unfair terms in circumstances where they have little or no opportunity to negotiate with businesses, such as with standard form contracts.

Standard form contracts

It is common for businesses to offer consumers the same or a similar contract. This is known as a standard form contract.

Businesses may use standard form contracts to improve efficiency, but they must take account of your consumer rights when preparing their contracts.

There are laws in place to protect you from unfair terms in standard form consumer contracts.

Contract terms that are not covered

Most terms in standard form consumer contracts are covered by the unfair contract terms law. However, the following terms are exempt:

  • terms that set out the price
  • terms that define the product or service being supplied
  • terms that are required or permitted by another law (such as terms limiting liability permitted by Australian Consumer Law).

Contracts that are not covered

There are also contracts for certain goods or services that this law does not apply to, including:

  • constitutions, including the constitutions of many superannuation funds, companies, and managed investment schemes
  • contracts for the shipping of goods.

How to tell if a term in a contract is unfair

There are a number of factors to consider when deciding whether a term is potentially unfair. The fairness of a term must be considered in the context of the contract as a whole.

The following questions can help you recognise a potentially unfair term, but it is important to note that the final decision on whether a term is unfair can only be made by a court.

  • Does the term cause a significant imbalance between your rights and obligations and those of the business?
  • Is the term reasonably necessary to protect the legitimate interests of the business?
  • Would the term cause you detriment (financial or non-financial) if the business tried to enforce it?
  • How transparent is the term?

Ending a contract

There are limited circumstances when consumers may end a contract without penalty and these can include:

  • if the business has misrepresented the goods, services, terms or conditions
  • if a cooling-off period applies.

A cooling-off period is a safeguard designed to give consumers the opportunity to change their minds about a purchase or agreement they have made. You have a right to a cooling-off period when you purchase goods or services through telemarketing or door-to-door sales.

More information

Unfair contract terms

Consumers and unfair contract terms

Unfair contract terms review report

Unfair contract terms in relation to financial products and services (including insurance)