Documents · Glossary

What is a standard form contract?

A standard form contract is one party's pre written terms, offered to everyone on the same basis, where the other side can effectively only accept or decline. Australian law presumes a contract is standard form, and the party who prepared it has to prove otherwise if that is disputed.

Almost every business both issues and signs them, usually without noticing which side of the transaction they are on. The rules changed materially in November 2023, and the change had teeth.

Nuwan Madhusanka · Co-founder

5 min read · Published 12 September 2026

What a court weighs when deciding whether a contract is standard form
Factor	What it looks at
Bargaining power	Whether one party held all or most of it
When it was prepared	Whether the terms were written before any discussion of the transaction
The real choice offered	Whether the other party could only accept or reject as presented
Opportunity to negotiate	Whether there was any genuine chance to change the terms
Tailoring	Whether the terms took account of that party or that transaction
Repeat use	Whether the same or very similar contracts have been used, and how often

The practical reality behind the label

Nobody negotiates a phone plan, a software subscription, a gym membership or a set of terms of trade printed on the back of an order form, and nobody expects to. Standard terms are how businesses operate at volume, and there is nothing improper about them. The concern the law addresses is narrower: that a party with no ability to change the wording can end up bound by a term they would never have accepted if asked. That is why the regulation targets unfairness in particular terms rather than the use of standard forms as such, and why a well drafted set of standard terms is entirely safe to issue.

What changed in November 2023

Before that date, an unfair term in a standard form contract could be declared void, and that was largely the end of it. From 9 November 2023 proposing, using or relying on an unfair term is prohibited, and penalties apply for breaches. The definition of a small business contract was broadened at the same time, and the tests for deciding whether a contract is standard form were expanded to include how often the same or similar contracts have been used. The changes apply to standard form contracts made or renewed on or after that date, and to a term varied or added on or after it. That last point catches older agreements whenever they are touched.

What makes a term unfair

Three elements have to be present together. The term causes a significant imbalance in the parties' rights and obligations. It is not reasonably necessary to protect the legitimate interests of the party who benefits from it. And it would cause financial or other detriment to the other party if relied on. A court looks at the contract as a whole and at whether the term is transparent, meaning expressed in reasonably plain language, legible, presented clearly and readily available. Terms setting the main subject matter, the upfront price and terms required by law are excluded from the assessment, which is why the price itself cannot be attacked as unfair.

The kinds of terms that attract attention

The legislation gives examples, and a pattern runs through all of them: rights held by one party and not the other. A term letting only the supplier vary the contract, or vary the price, after it is signed. A term letting only one party terminate. A term penalising only one party for breach. A term allowing one party to determine whether the contract has been breached or to interpret its meaning. Automatic renewal with a long notice period buried in a schedule. A broad indemnity given by the weaker party. Unilateral rights to assign. None of these is automatically unfair, and each one is worth a second look before it goes into a document meant for everybody.

Writing standard terms that hold up

Transparency does most of the work. Plain language, short sentences, a readable size, headings a reader can navigate, and the important limits stated in the body rather than in a schedule. Reciprocity does the rest: where a right is genuinely needed, ask whether the other party can reasonably have the same one, and where it cannot be reciprocal, be able to explain why it protects a legitimate interest. Keep the liability position proportionate to the price rather than absolute. And review the set when the law changes or when the business model does, because terms written for a product that no longer exists are the ones that read worst.

Signing somebody else's standard terms

Most small businesses spend more time on this side of the transaction. Read the clauses that decide what happens when something goes wrong: liability, indemnity, termination, variation, automatic renewal and dispute resolution. Ask for changes even where the supplier says there is no flexibility, because there often is on one or two points and the answer costs nothing to obtain. Where a term looks unfair and the supplier will not move, note it, because the protections now available mean a term proposed in a small business standard form contract is not the end of the argument. Keep the version you signed, with its date, since suppliers update their terms and the set that applies is the one in force when you agreed.

Questions people ask

Does the unfair terms regime cover business to business contracts?

It covers small business contracts as well as consumer contracts, and the definition of a small business contract was broadened in November 2023. Contracts between two large businesses are outside it, which is why the protections are best understood as directed at parties with no bargaining power rather than at any particular industry.

Can a term be unfair if it was never enforced?

Since November 2023, proposing or using an unfair term is itself prohibited, so a term sitting unused in a standard form contract can still be a problem. That is a significant change from the earlier position, where the consequence was that the term was void if challenged and nothing more.

What happens to an unfair term?

It is void, meaning it is treated as never having been in the contract, while the rest of the contract continues if it can operate without it. Penalties may also apply to the party who proposed, used or relied on it, and a court can make orders including injunctions and orders to redress loss.

Is a negotiated contract safe from the regime?

Genuinely negotiated contracts are not standard form and the regime does not apply. The presumption runs against the party who prepared the document, so being able to show real negotiation matters: marked up drafts, emails about specific clauses, changes that were actually made. Minor or insubstantial changes do not take a contract out of the category.

Do these rules exist outside Australia?

Similar protections exist in many jurisdictions. The United Kingdom addresses unfair terms in consumer contracts through consumer rights legislation, and the European Union has its own directive. The detail differs considerably, particularly on whether business to business contracts are covered, so terms written for one market should be reviewed before use in another.

How often should standard terms be reviewed?

Annually, and whenever the law or the business changes. A review should check the clauses the regime targets, whether the language is still plain, and whether the terms match how the business actually operates. Terms that describe a process nobody follows are both unfair and useless, which is the worst combination available.

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Sources

Written and checked by the OneCraft team. Last checked 12 September 2026.