Last Updated on 22/08/2025 by Damin Murdock
Cloud services have become indispensable for businesses of all sizes in Australia, offering unparalleled flexibility and efficiency. However, for both cloud service providers and their clients, understanding the legal landscape governing these agreements is crucial. A key area of focus in Australia is compliance with the unfair contract terms provisions under the Australian Consumer Law (ACL), which specifically apply to standard form contracts involving both consumers and small businesses.
At Leo Lawyers, we guide businesses through the intersection between law and technology. In this article, we dive into the essential aspects of unfair contract terms in cloud agreements and how to meet Australian legal requirements.
Understanding Unfair Contract Terms in Cloud Agreements
The ACL’s unfair contract terms provisions are designed to protect parties who have little or no opportunity to negotiate standard contract terms.
- Standard Form Contracts
Contracts are presumed to be standard form unless proven otherwise. A term within such a contract may be deemed unfair if it causes a significant imbalance in the parties’ rights and obligations; is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied upon.
- Small Business Protections
Since November 2016, the ACL’s unfair contract terms protections extend to small businesses as well as consumers. These provisions apply to businesses with fewer than 20 employees, provided the contract value thresholds are met: up to $300,000 for contracts under 12 months, or up to $1,000,000 for contracts over 12 months. These thresholds are regularly updated so please double check these thresholds before relying upon this article.
Ensuring Compliance: Drafting Fair Cloud Service Terms
To ensure your cloud service agreements are compliant and enforceable, meticulous review and careful drafting are essential.
- Contract Terms Review
It is vital to review contract terms against examples of unfair terms provided in Section 25 of the ACL. This review should consider the contract as a whole, paying particular attention to any counterbalancing terms that might offset a seemingly unfair provision. Specific areas requiring scrutiny for transparency and fairness include pricing variations, contract renewal terms, termination rights, and indemnity clauses.
- Required Protections
Cloud service contracts must implicitly include consumer guarantees under the ACL, which cannot be excluded. All terms must be transparent and clearly expressed, ensuring they are readily understood by the parties. Critically, the contract must be capable of operating without any unfair terms. If an unfair term is found, it will generally be held void, but the court normally has the discretion for the remainder of the contract to stand if it can operate without that term.
Key Considerations for Cloud Service Providers
Navigating the unfair contract terms provisions requires a proactive and strategic approach for cloud service providers.
- Timing Implications:
The unfair contract terms provisions apply to contracts entered into or renewed after 12 November 2016. Any variations made to existing contracts after this date can also trigger review requirements under the ACL.
- Risk Management:
If an unfair term is identified and declared void, the contract may continue to bind the parties if it can operate without that void term. Therefore, regular review of standard terms is highly recommended to identify and address any potentially unfair clauses. It is also important to document the legitimate business interests that underpin terms that might otherwise appear to be unfair.
- Practical Steps:
To bolster compliance, maintain clear documentation of the contract formation process, including any discussions or opportunities for negotiation. Where possible, provide genuine opportunities for negotiation, even on standard form contracts, as this can undermine the presumption of “standard form” and the unfairness of certain terms. Include clear dispute resolution procedures within your contracts. Most importantly, ensure regular review and updates of your standard terms to reflect changes in law, industry best practices, and your own risk profile.
Conclusion
Compliance with unfair contract terms provisions is non-negotiable for cloud service contracts in Australia, particularly those offered on a standard form basis to consumers and small businesses. By meticulously reviewing terms for fairness and transparency, ensuring inclusion of mandatory consumer guarantees, and adopting proactive risk management strategies, cloud service providers can build robust and legally compliant agreements.
Feel free to contact Damin Murdock at Leo Lawyers via our website, on (02) 8201 0051 or at office@leolawyers.com.au. Further, if you liked this article, please subscribe to our newsletter via our Website, and subscribe to our YouTube , LinkedIn, Facebook and Instagram. If you liked this article or video, please also give us a favourable Google Review.
DISCLAIMER: This is not legal advice and is general information only. You should not rely upon the information contained in this article and if you require specific legal advice, please contact us.
Damin Murdock (J.D | LL.M | BACS - Finance) is a seasoned commercial lawyer with over 17 years of experience, recognised as a trusted legal advisor and courtroom advocate who has built a formidable reputation for delivering strategic legal solutions across corporate, commercial, construction, and technology law. He has held senior leadership positions, including director of a national Australian law firm, principal lawyer of MurdockCheng Legal Practice, and Chief Legal Officer of Lawpath, Australia's largest legal technology platform. Throughout his career, Damin has personally advised more than 2,000 startups and SMEs, earning over 300 five-star reviews from satisfied clients who value his clear communication, commercial pragmatism, and in-depth legal knowledge. As an established legal thought leader, he has hosted over 100 webinars and legal videos that have attracted tens of thousands of views, reinforcing his trusted authority in both legal and business communities."
