What counts as a standard form contract in Australia?

Why this question comes first

The unfair contract terms regime only applies to standard form contracts with consumers and small businesses. So before asking whether a term is unfair, you have to establish whether the contract is in scope at all.

Businesses often assume that because a document is titled an agreement, or because a few things were discussed before signing, it is not standard form. That is not the test.

What a court weighs

Section 27(2) of the Australian Consumer Law sets out the matters a court must take into account. No single factor decides it.

Bargaining power

Whether one party has all or most of the bargaining power in the relationship.

Who wrote it

Whether the contract was prepared by one party before any discussion took place.

Take it or leave it

Whether the other party was required to accept or reject the terms in the form they were presented.

A real chance to negotiate

Whether the other party was given an effective opportunity to negotiate the terms, not merely invited to ask.

Whether it was tailored

Whether the terms take into account the specific characteristics of the other party or the particular transaction.

Minor tweaks do not take it out of scope

From 9 November 2023, section 27(3) was amended to make clear that a contract can still be standard form even though one party had an opportunity to negotiate changes that were minor or insubstantial in effect.

The practical consequence is that a supplier cannot protect itself by letting a customer adjust the start date or pick from a menu of packages, then arguing the contract was negotiated. The negotiation has to be capable of mattering.

Being able to negotiate a different contract with the same supplier does not help either.

What this means in practice

If you are buying, most supplier paper you are handed will be standard form, and the unfair contract terms regime is available to you if you meet the small business threshold.

If you are selling, assume your standard terms are standard form and review them on that basis. Keeping a record of genuine negotiation on the contracts where it happened is worth doing, because the presumption runs against you.

Common questions

Is a contract standard form just because it is a template?

Using a template is a strong indicator but not decisive on its own. A court weighs bargaining power, who prepared the document, whether it was offered on a take it or leave it basis, whether there was an effective opportunity to negotiate, and whether the terms were tailored to the particular party or transaction.

Does negotiating some terms stop a contract being standard form?

Not if the changes were minor or insubstantial. Section 27(3) was amended on 9 November 2023 to confirm that an opportunity to negotiate immaterial changes does not prevent a contract being standard form.

Who has to prove a contract is standard form?

Once it is alleged in proceedings, the contract is presumed to be standard form unless the other party proves otherwise. The burden effectively falls on whoever drafted it.