Contracts and your consumer rights

An introduction into contracts

A contract is an agreement made between 2 or more parties that is legally enforceable. When you buy products or services, you enter into a contract with a seller.

Contracts can be made in writing or verbally, and entered into several ways including:

• signing a document
• agreeing over the phone
• paying for a product or service, including paying a deposit
• clicking an ‘I agree’ button on a web page.

Before signing a contract

Before signing a contract, you should:

• take time to consider the contract carefully
• be sure you really want and know what you are signing for
• read every word - including the fine print
• seek legal advice if you don't understand the contract
• not be pressured into signing anything
• if necessary, take the contract home overnight and read it through
• never sign a contract that contains blank spaces
• make sure that all parties initial any changes that are made to the contract you sign
• always get a copy of any contract you sign. 

Try and get a written contract

It’s a good idea to have a written contract as it:

• minimises misunderstandings
• results in fewer disputes.

With a verbal contract, it may be difficult to prove exactly what was agreed to, or even if a contract existed.

The elements of a contract

A contract has 3 elements:

1. Offer: This is made when a seller offers a product, and you accept by making a payment. 
2. Acceptance: This is done when the seller offers to supply the goods or services, and the buyer accepts the offer.  Acceptance may be in words or an action (for example, if you signed a written agreement accepting the terms and conditions).
3. Consideration: This is the value (usually money) that is given in return for the goods or services to be supplied or acquired. It can also be an agreement to pay at a later date after certain events occur or procedures are followed.

Australian Consumer Law and standard form contracts

Australian Consumer Law applies to ‘standard form’ consumer contracts for the supply of goods and services, or for the sale or grant of an interest in land, to an individual for personal, domestic or household use.

Generally, a ‘standard form’ contract:

• is prepared by the business
• contains a set of generic terms and conditions
• is not negotiated between parties
• is presented on a 'take it or leave it' basis.

What you can expect after entering into a contract

Despite what is written in a contract, there may be terms and conditions outside the agreement that the law imposes. For example, while a contract may include a clause saying, 'no refunds', the law gives people a non-excludable right to a refund under certain circumstances. 

Contracts are legally binding

You should be aware that payment of a deposit and/or signing any documents might mean you have entered into a contract and are bound by the terms and conditions of that contract.

Once you agree to a contract, you are committed to it, so it is important you are comfortable with the contract terms.

You may be penalised if you breach a contract

Consumers who breach a contract might have to compensate a business for any loss they incur. Alternatively, businesses might have to compensate consumers for breach of contract for any loss they incur.

In many instances, parties are entitled to an amount to cover ‘reasonable costs'. What is reasonable can vary with every contract.

The law requires that both consumers and businesses take reasonable steps to minimise any losses incurred as a result of a breach of agreement. 

If your property is damaged during the contract

Businesses must ensure that contracts are performed with due care and skill.

In the event a consumer’s property is lost or damaged, particularly through business negligence, the consumer may seek compensation to cover this loss. 

Delays in delivery and non-supply

Before buying an item, make sure you know the expected delivery time.

The business must supply the goods and services in the time specified in the contract, or if a time has not been specified, within a reasonable time after accepting payment. What is reasonable can vary with each contract. 

Things to look out for in your contract if you are a consumer

Misleading or deceptive conduct

Australian Consumer Law protects consumers from misleading or deceptive conduct.

Business conduct is likely to break the law if it creates a misleading overall impression among the intended audience about the price, value or quality of consumer goods or services.

Whether a business intended to mislead or deceive is irrelevant, what matters is how their statements and actions - the 'business conduct' – could affect the thoughts and beliefs of a consumer.

Learn more about misleading or deceptive conduct. 

Unfair contract terms

Contracts should not contain unfair terms (legal obligations). Generally, a contract term is ‘unfair’ if these three conditions are met:

1. The contract is one-sided and greatly favours the business over the consumer.
2. There is no satisfactory commercial reason why the business needs such a term.
3. The consumer will suffer financial loss, inconvenience or other disadvantage if the term is enforced.

Australian Consumer Law and standard form contracts 

Australian Consumer Law protects consumers against unfair terms in standard form consumer contracts. The law applies to new contracts entered into on or after 1 July 2010 and terms of existing contracts renewed or varied on or after 1 July 2010.

Changes to the law on unfair contract terms came into effect on 9 November 2023.

The new laws ban and penalises businesses in standard form contracts from:

• proposing unfair contract terms
• using unfair contract terms
• relying on unfair contract terms.

Other key changes relate to deciding whether a contract is a standard form contract and the definition of a small business contract.

The changes apply to:

• standard form contracts made or renewed on or after 9 November 2023
• a term of a contract that is varied or added on or after 9 November 2023.

Where a term of a contract is varied or added on or after 9 November 2023, the changes relevant to deciding whether a contract is a standard form contract apply to the whole contract.

Examples of potential unfair contract terms

• Terms that allow the business to make unilateral changes to important aspects of the contract, such as increasing charges or varying the type of product to be supplied, with no right for the consumer to cancel the contract without penalty.
• Terms that avoid, limit, or restrict the liability of a supplier, its employees or agents for a breach of the contract.
• Terms that require consumers who breach the contract or end it early to pay an excessive amount in compensation or cancellation charges.

Note: Contracts can still include these terms, as they are not banned, but if used in certain circumstances, they can be unfair. Always seek independent legal advice before entering into a contract.

A court can decide if a contract term is unfair

Only a court can decide if a term is unfair.

When deciding whether a term is unfair, the court will consider:

• all the rights and responsibilities for each party under the contract
• whether the term is transparent.

A term is transparent if it is:

• in reasonably plain language
• clear, and
• not hidden.

The court will consider whether any other terms in a contract offset the potential unfairness of a term.

Removing unfair contract terms

If a court or Tribunal finds that a contract term is unfair, it is void. The term is treated as if it never existed and cannot be enforced or relied on. If the rest of the contract can continue without that term, then rest of the contract will continue to apply to the parties.

Contract terms that Australian Consumer Law excludes

Australian Consumer Law does not apply to contract terms that:

• describe the goods, services or land that you’ve agreed to buy
• set the upfront price payable under the contract, provided the price is disclosed before the contract is entered into
• are required or permitted by law as a matter of public policy.

Ending a contract

Once a contract has been signed, neither party can change their mind. Everyone involved is bound by the terms and conditions of that contract.

If either party wants to pull out of the contract before it’s finished, they may end up paying a penalty, sometimes the full amount of the contract, or the other party may take them to court to recover their losses.

Some contracts allow a party to 'opt out' or terminate the contract early, with or without a penalty. If either party wants an opt-out clause in the contract, they should get independent legal advice to make sure they are properly protected.

There are limited circumstances when consumers may end an agreement without penalty. These include:

• misrepresentation of the goods, services, terms or conditions
• a cooling-off period provided under Australian Consumer Law. 

Types of contracts

Contracts with minors

The Minors (Property and Contracts) Act 1970 binds children under the age of 18 where it can be shown the contract is to their benefit and can include:

• contracts
• leases, and
• other transactions.

It does not consider parent or guardian wishes as to whether or not the contract should have been formed.

People doing business with minors will often require someone over the age of 18 to guarantee that the minor fulfills their part of the contract.

Non-disclosure agreements

A non-disclosure agreement (also known as a confidentiality agreement) is a legal contract between two or more parties that prevents the disclosure of certain information to an outside party.

A non-disclosure agreement may be used to settle a dispute between a consumer and a person or a business, so that both sides can achieve a result without having to go to court or tribunal.

Every non-disclosure agreement is different. The contract terms can vary depending on the parties involved, the type of agreement, payment information and how the agreement can be disputed or ended.

Contract terms may relate to:

• the information that can be disclosed
• how information can be disclosed (e.g. in an oral conversation or email)
• the people information can be disclosed to (e.g. accountant or solicitor)
• the duration of the agreement.

Consumers who raise a complaint about a product or service may be asked by the trader to sign a non-disclosure agreement to settle a dispute and receive:

• a replacement
• a refund, or
• compensation.

It is not compulsory for the consumer to sign a non-disclosure agreement.

Non-disclosure agreements cannot stop a consumer from making a complaint

A non-disclosure agreement cannot limit a consumer’s ability to lodge a complaint with NSW Fair Trading. Any such terms in a non-disclosure agreement will be void and not legally enforceable.

Before or at the time of asking a consumer to enter into a non-disclosure agreement, the law requires that the trader inform the consumer of their ongoing right to lodge a complaint with NSW Fair Trading.

Penalties for not informing a consumer about their rights

If a trader fails to inform a consumer of their ongoing right to lodge a complaint with Fair Trading, the law provides for maximum penalties of:

• $22,000 for offences by corporations, or
• $4,400 in any other case. 

Making a complaint 

You can lodge a complaint: 

Online

If you cannot resolve your matter, submit your complaint by using our form.

Make a complaint

By mail

Post your complaint form and documentation to: 

NSW Fair Trading

PO Box 972 

Parramatta NSW 2124 

Ask a question 

If you are unable to find the information you need, you can call us between 8:30am to 5pm on Monday to Friday. You can also use our form to make an enquiry. 

Make an enquiry
 

Related links

Complaints Register

Find more information on unfair contract terms and the law on the ACCC and ASIC websites.