Unfair Contract Terms in Australia: Case Highlights From 2025

This article for the In Competition Blog by authors Caroline Chong & Tamara Hunter (King & Wood Mallesons) looks into key developments in Australia’s unfair contract terms (UCT) regime during 2025 and the practical lessons emerging from recent enforcement actions and court decisions. Following the introduction of significant penalties for unfair contract terms in November 2023, both the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission increased enforcement activity, including litigation and court-enforceable undertakings involving standard form contracts.

The authors highlight several cases that clarify how courts assess whether contract terms create a “significant imbalance” between parties and whether they are reasonably necessary to protect legitimate business interests. A key decision was AghaeiRad v Plus500AU, where a dispute-resolution clause requiring arbitration was challenged after a trader lost funds on an online trading platform. The court emphasized that arbitration provisions may be considered unfair if they impose disproportionate costs relative to the value of claims or if they are insufficiently transparent to consumers.

Another notable decision was Anderson v Kincumber Nautical Village Pty Ltd, which examined a fee-escalation clause in a residential land-lease agreement. The tribunal found that the formula allowing regular increases in site fees created an unfair imbalance and declared the clause void. The case highlights that even clearly drafted formulas may still be unfair if they give one party broad unilateral discretion or cannot be justified with evidence demonstrating their necessity.

Finally, the article discusses the appellate ruling in ASIC v Auto & General Insurance, which upheld an insurance notification clause requiring policyholders to inform insurers about changes to insured risks. The court concluded the term was not unfair, noting that such obligations can be reasonable when properly explained. Overall, the authors emphasize that businesses using standard form contracts should ensure clauses are proportionate, evidence-based, transparent, and consistent with the expectations of a reasonable consumer…

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