Unfair contract terms – A $3.5 million warning

Published on 15 October 2026

What the $3.5 million CashnGo decision means for councils

Article by Joshua Brown, General Counsel & Compliance Manager

Key takeaways

• The CashnGo decision demonstrates the growing consequences of unfair contract terms.
• A one-sided contract term may no longer simply be unenforceable. If a term in a standard form contract is found to be unfair, organisations can face significant financial penalties, court orders restraining future reliance on the term, and the possibility that the provision will be treated as void from the outset.
• Now is an opportune time to review contractual terms and ensure they remain balanced, transparent and capable of being justified as reasonably necessary to protect legitimate interests.

The Federal Court's recent decision in Australian Securities and Investments Commission v Venture 5 Group Pty Ltd (trading as CashnGo) [2026] FCA 1278 provides a timely reminder for organisations that utilise standard form contracts.

The court imposed $3.5 million in penalties against Venture 5 Group Pty Ltd (trading as CashnGo) after finding that the respondent CashnGo had relied upon, or purported to rely upon, unfair contract terms contained within its consumer credit contracts. The court also granted permanent injunctions preventing future reliance on those terms and found that certain terms were void from the outset.

Whilst the decision arose under the unfair contract terms provisions of the ASIC Act, the court confirmed principles that are equally relevant to the equivalent unfair contract terms regime under the Australian Consumer Law (ACL).

The courts key message

The case demonstrates that unfair contract terms are no longer simply unenforceable clauses sitting in the background of a contract.

Organisations can face substantial penalties merely for relying upon, attempting to rely upon, or including unfair contract terms in standard form agreements.

The focus is not whether a clause was actually enforced. Rather, the question is whether the clause itself satisfies the statutory test for unfairness.

What makes a contract unfair?

The court reaffirmed that a contract term will be unfair if it:

• creates a significant imbalance in the parties' rights and obligations;
• is not reasonably necessary to protect the legitimate interests of the party benefiting from the term; and
• would cause detriment if applied or relied upon.

Relevantly for councils, the ACL contains a non-exhaustive list of examples of terms that may be unfair. Whether a particular provision is ultimately found to be an unfair contract term will depend on the circumstances of the case and is a matter for determination by the courts.

Key principles to consider:

Principle 1: A clause cannot be excessively one sided

The court confirmed that a significant imbalance exists where a term is so heavily weighted in favour of one party that it substantially tilts the contractual relationship in that party's favour.

This does not mean parties cannot protect themselves through contractual risk allocation. However, protections must remain proportionate.

For councils, this is a useful reminder to review clauses that provide broad unilateral powers, excessive discretion, one-sided termination rights, disproportionate indemnities or liability protections that lack a corresponding justification.

Principle 2: There must be a genuine business or commercial need

One of the most significant aspects of the decision is the court's discussion of legitimate interests.

The court emphasised that a term must be reasonably necessary to protect a legitimate interest of the party benefiting from it. The assessment is not whether the clause is useful or desirable, but whether it is genuinely needed.

Importantly, legislation presumes that a term is not reasonably necessary unless the benefiting party can demonstrate otherwise. In practical terms, organisations should be able to explain:

• What the risk is addressing
• Why the clause is required
• Why a less burdensome alternative would not adequately protect the party’s legitimate interest.

If those questions cannot be readily answered, the clause may warrant closer review.

Principle 3: Detriment is broader than just financial loss:

The court also made it clear that detriment is not limited to monetary loss.

A term may be unfair where it exposes the other party to operational, procedural or practical disadvantage if the clause is relied upon. Importantly, actual harm does not need to occur. It is sufficient that detriment would arise if the term were enforced.

This broad interpretation significantly expands the circumstances in which a term may be found to be unfair.

Principle 4: Transparency matters

The court reaffirmed that transparency remains a critical consideration.

The more significant the imbalance or potential detriment created by a clause, the greater the need for that clause to be drafted clearly and presented prominently. The court observed that a lack of transparency may itself indicate that a significant imbalance exists.

Complex drafting, hidden rights, broad discretionary powers and difficult-to-understand provisions can therefore contribute to a finding of unfairness.

Simply put, if an organisation intends to rely on an important contractual right, that right should be easy to locate and easy to understand.

Looking at the contract as a whole

Importantly, the court confirmed that individual clauses cannot be considered in isolation. A term must be assessed within the context of the contract as a whole, including any balancing rights, protections or safeguards available to the other party.

This reinforces the importance of conducting a holistic review of standard form contracts rather than focusing solely on isolated provisions.

Why this matters for councils

Many councils use standard form contracts to streamline procurement and contract management activities. While those contracts rightly seek to protect public funds and manage risk, the CashnGo decision serves as a reminder that contractual protections must be proportionate to the interests they seek to protect.

The safest approach is not to ask whether a clause strongly protects the council's position.

The better question is: Could the council clearly explain why this clause is reasonably necessary, proportionate to the risk being managed, transparent, and unlikely to create an unjustified imbalance in the contractual relationship?

If the answer is uncertain, the clause may warrant further review.

Reducing risk through established Local Buy contract conditions

Did you know?

Local Buy's default contract conditions have been developed to support fair, balanced and commercially practical outcomes for both purchasers and suppliers. The conditions have been reviewed and accepted by pre-qualified suppliers and are designed to promote transparent risk allocation while reducing the need for extensive contract negotiations. Where project requirements warrant, suppliers remain able to seek negotiated departures.

Councils interested in understanding how these contract frameworks can assist in managing contractual risk and improving procurement efficiency are encouraged to contact Local Buy at enquiry@localbuy.net.au for further information.

Case Link: 26-203MR ASIC v Venture 5 Group Pty Ltd - Judgment - 31 Aug 2026