Are Automatic Rollover Clauses in Contracts Unfair? What Small Businesses Need to Know

Published: July 2025

Source: Based on guidance from the Australian Competition and Consumer Commission (ACCC)

Introduction

Automatic renewal or “rollover” clauses might sound convenient - especially for busy business owners juggling multiple priorities. But in some cases, these contract terms can lock small businesses into agreements they no longer want or need.

The ACCC has made unfair contract terms a compliance priority for 2025–26, with a particular focus on rollover clauses, cancellation penalties, and automatic renewal traps. If you’re a small business owner or franchisor, now is the time to check your contracts - both the ones you offer and the ones you sign.

⚠️Note: Bane Legal Services is not a law firm and does not provide legal advice. However, with over 30 years of business experience, we connect clients with the right commercial lawyer for their needs.

What Is an Automatic Rollover Clause?

An automatic rollover clause means that a contract is extended by default at the end of its term - unless the customer takes active steps to cancel it.

For example, if your internet contract has a rollover clause, it might automatically renew for another 12 months unless you cancel in writing within a certain timeframe. If you’re happy with the service, that might be fine. But if you're dissatisfied, it could mean getting stuck with poor service or high fees for longer than expected.

When Can Rollover Clauses Be Considered Unfair?

Under Australian Consumer Law, standard form contracts with unfair contract terms may be unenforceable. The ACCC considers rollover clauses potentially unfair in circumstances such as:

• The renewal clause wasn’t disclosed clearly before the contract was signed.

• The customer wasn’t given reasonable notice that the contract would auto-renew unless cancelled.

• High termination fees apply if the contract is cancelled after renewal.

• The rollover period is excessively long (e.g. automatic renewals for multiple years).

The law recognises that small businesses are often at a disadvantage when dealing with pre-prepared, one-sided contracts - especially from larger suppliers or franchisors.

Real-World Examples: Maxgaming and Fujifilm

In 2022, the ACCC investigated Maxgaming Qld Pty Ltd, which included automatic rollover clauses in contracts with small businesses - without notifying customers before the contract renewed. Some contracts were extended for up to six years.

Following the ACCC’s investigation, Maxgaming agreed to reform its contracts, including:

• Shorter renewal periods (down to one year)

• Advance notice before rollover occurs

In another 2022 case, the Federal Court found that Fujifilm Business Innovation Australia included unfair renewal terms in its contracts with small businesses. Customers had to cancel well in advance of expiry or risk being automatically locked in again.

These cases demonstrate the risks small businesses face - and the importance of carefully reviewing standard form contracts.

Before You Sign: A Checklist for Small Businesses

Before signing any agreement, particularly if it involves long-term service or supply, consider the following:

• Check for rollover or automatic renewal clauses

• Understand cancellation timeframes - how early must you notify to avoid renewal?

• Look for exit costs - will there be penalties if you cancel after rollover?

• Seek legal advice - especially if the contract is high-value or multi-year

Not sure where to start? Bane Legal Services can connect you with a commercial lawyer who understands contract law and can help you protect your business interests.

How to Handle a Suspected Unfair Contract Term

If you believe a clause in your contract is unfair:

1. Start by contacting the other party - you may be able to negotiate changes.

2. Remember, only a court or tribunal can declare a term unfair.

3. You can also report potentially unfair terms to the ACCC. Reports help shape future investigations and policy enforcement.

More Resources for Small Business

You can learn more through the ACCC’s Small Business Education Module on Unfair Contract Terms available on the ACCC website.

You can also seek help from:

• Australian Small Business and Family Enterprise Ombudsman (ASBFEO)

• Your State or Territory Small Business Commissioner

Need Help Navigating Contracts?

While we don’t give legal advice, Bane Legal Services can help you find the right lawyer for your business needs. Whether you’re reviewing franchise agreements, commercial leases, or supplier contracts - the right legal support can save you from costly surprises down the line.

Contact us today to speak with a legal matchmaker.

Source:

This article is based on content from the ACCC’s explainer on unfair contract terms (automatic rollover clauses), originally published by the Australian Competition and Consumer Commission.