The Unfair Contract Terms Regime // What We’ve Learned Two Years On
The strengthened Unfair Contract Terms (UCT) regime under the Australian Consumer Law (ACL) has now been in effect for just over two years. Since the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 commenced on 9 November 2023, both regulators and courts have made it clear: the new rules have teeth, and enforcement is well underway.
For organisations using standard-form agreements - especially when contracting with small businesses - the past two years offer helpful guidance on how the regime is being interpreted, where the risks lie, and what should change.
Below, we unpack the key cases, regulatory trends and practical implications or Australian businesses.
Key Decisions Shaping the UCT Landscape
PayPal: Fee-Error Clause Struck Down
ASIC v PayPal Australia Pty Ltd [2024] FCA 762
The Federal Court found PayPal’s “Fee Error” clause - which required small business customers to notify PayPal of any fee discrepancies within 60 days or accept the fees as correct - to be unfair. The clause created a substantial imbalance and wasn’t reasonably necessary to protect PayPal’s interests.
No penalties were imposed because the term was only used before 9 November 2023, when the new penalty provisions commenced (PayPal removed the term on 8 November 2023.
Auto & General: Context Matters
ASIC v Auto & General Insurance Company Limited [2024] FCA 272
A broadly drafted obligation requiring insured customers to “tell us if anything changes” was not found to be unfair.
Why?
The Court accepted that insurers have regulatory and commercial reasons to require updated information, and that the clause had to be read in context - not literally.
The case highlights that broad does not automatically mean unfair, provided the term is proportionate, transparent and linked to a legitimate interest.
IG Markets: Unilateral Discretions Under Pressure
Tomasso v IG Markets Ltd [2025] WA SC 338
The Court held that IG Markets’ ability to void or amend trades based on an undefined “error” was unfair. The discretion operated solely in IG Markets’ favour and was not shown to be reasonably necessary.
The consequences were significant: the customer retained approximately $5.5 million in trading profits that IG Markets had attempted to reverse.
ACCC v Mable: First Major Enforcement Under the New Regime
In June 2025, the ACCC announced its first enforcement action under the expanded UCT laws. The matter resolved through a court-enforceable undertaking, but the message was clear.
The ACCC found unfair terms in Mable’s standard-form contracts, including provisions that:
shifted disproportionate risk to workers and consumers
allowed unilateral suspension or termination
permitted withholding or clawback of payments without a clear link to a legitimate interest
Mable agreed to amend or remove the terms, increase transparency for users, and implement a three-year ACL compliance program.
This action demonstrates the regulator’s willingness to intervene - especially where digital platform business models rely on heavily one-sided terms.
Themes Emerging from Courts and Regulators
Across decisions and enforcement actions since November 2023, several trends are clear:
Enforcement is active - both ASIC and the ACCC have UCT enforcement on their priority lists.
Penalities are substantial - with maximum penalities now reaching $50 million per contravention.
One-sided discretions are high-risk - especially unilateral rights to vary, terminate, correct “errors” or impose fees.
Legitimate interest remains the core question - businesses need to be able to explain why a clause is necessary.
Transparency matters - buried, complex or ambiguous terms carry greater risk.
Void terms can have major commercial impact - as seen in the IG markets decision.
What This Means for Businesses Using Standard-Form Contracts
1. Coverage is broader than you think
The definition of “small business” now captures most Australian businesses (fewer than 100 employees or turnover under $10 million).
This means organisations should assume the UCT regime applies to many - perhaps most - of their commercial counterparties.
2. Standard-form precedents should be prioritised
Risk is greatest where businesses issue “take-it-or-leave-it” documents to small suppliers, contractors or consultants. These are the agreements most likely to attract scrutiny.
3. Reg-flag clauses to review
Terms most likely to be problematic include:
unilateral error-correction or fee-correction clauses (seen in PayPal and IG Markets)
broad ongoing disclosure obligations without a clear legitimate interest (Auto & General)
one-sided termination, suspension or variation rights
indemnities or liability clauses imposing disproportionate risk
short time bars for raising objections
opaque, technical or complex drafting that reduces transparency
4. How to update contracts without losing protection
A UCT review doesn’t require a business to give up necessary protections. Instead, it involves reframing terms to ensure:
each clause is clearly linked to a legitimate interest
rights and obligations are balanced where possible
drafting is clear, transparent an easy to understand
high-risk discretions are narrowed, explained or replaced with less restrictive alternatives
Final Thoughts
The expanded UCT regime is no longer theoretical - it is being actively enforced, with real financial and operational consequences for businesses relying on outdated or one-sided standard-form contracts.
For organisations operating at scale or contracting frequently with small businesses, a fresh review of standard templates is now an essential risk-management exercise. Ensuring transparency, balance and a clear legitimate interest behind each key term will help reduce enforcement risk and align your contracts with modern regulatory expectations.
If your organisation would benefit from a UCT review or guidance on updating your precedents, our Commercial team is here to support.