Unfair gym contract terms: when a term is void

The six kinds of term NSW Fair Trading names

NSW Fair Trading’s advice is to read the contract before signing and check whether any terms are unfair, and it gives a list. Before signing a gym membership, read the contract carefully and check whether any terms are unfair, because a term may be unfair if it allows the gym to:

change the contract without your consent;
make it hard or costly for you to cancel;
increase fees after you sign without letting you cancel;
charge excessive late payment fees;
prevent cancellation if you are seriously ill, injured, or unable to use the gym;
require an unreasonably long notice period to cancel.

The law behind the list sits in the Australian Consumer Law. A term of a consumer contract is unfair if it would cause a significant imbalance in the parties’ rights and obligations, it is not reasonably necessary to protect the legitimate interests of the party advantaged by it, and it would cause detriment, financial or otherwise, if applied or relied on. The law also lists examples of terms that may be unfair, among them a term permitting one party but not another to terminate the contract, a term penalising one party but not another for a breach or termination, a term permitting one party to vary the terms, a term permitting one party to renew or not renew the contract, and a term limiting one party’s right to sue another. Health and fitness centres generally use standard form consumer contracts, prepared by the business and offered on a take it or leave it basis, and that is the kind of contract these rules govern. There is a presumption that a contract is a standard form contract, so the party that prepared it must prove that it is not.

The same term, two different fates

Here is the disagreement this guide exists to resolve. In three jurisdictions the same kind of term is not a matter of argument at all, because a code forbids it outright; everywhere else the identical term sits in the contract until a court says otherwise. Both positions are true at once, and which one applies to you is decided by the state you joined in.

The term	Where a code forbids it	Where only a court decides
A term longer than it should be	Queensland: it is illegal for a gym to offer an ongoing agreement with a minimum term longer than 18 months. Western Australia: the code continues to limit the length of pre-paid memberships to 12 months. The ACT: a pre-paid membership over 12 months, or a periodic billing membership with a fixed term greater than 12 months, cannot be sold.	Elsewhere the length of the term is a term like any other. It can be challenged as unfair, and the challenge is for a court: only a court can decide if a term is unfair.
A term that makes cancelling hard	Western Australia: among the things a fitness service may not do is require someone to cancel a membership in person, or need written cancellation on a specific form. Victoria’s Consumer Affairs considers requirements to fill in specific forms and complete certain procedures to cancel a contract to be unnecessary formalities and unfair; forms may be provided, but their use should be optional.	New South Wales lists a term that makes it hard or costly to cancel among the kinds that may be unfair. A court decides, and if it finds the term unfair the term is void and cannot be enforced or relied on.
A term that moves the price	Western Australia: a gym must not charge a fee or charge under a membership agreement unless it has been disclosed in the agreement summary. Consumer Affairs Victoria considers membership fees and terms should not be changed during the minimum term, and that where a change adversely affects the consumer they should have the right to terminate without penalty.	New South Wales: a term that allows the gym to increase fees after you sign without letting you cancel may be unfair. The Australian Consumer Law’s own example is a term allowing a business to change prices during the contract term, which is likely to be an unfair contract term.
A term that ends on illness or injury	Queensland: a client may terminate an agreement if the client cannot use the fitness service because of permanent sickness or physical incapacity. Western Australia’s code gives a termination route on a medical certificate for permanent illness or physical incapacity. The ACT: a consumer who is unable to use the services because of permanent physical incapacity, verifiable by a medical certificate, is entitled to terminate by written notice.	New South Wales: a term preventing cancellation if you are seriously ill, injured or unable to use the gym may be unfair.

The pattern is the point. Where a code bans a term, the consumer can point to the rule and the regulator can act on it. Where no code reaches, the term stays in the contract until a court finds it unfair, and once a court finds a term unfair, it is treated as if it never existed.

What the court can do, and what it cannot

The Australian Consumer Law treats unfair terms in standard form contracts as banned conduct, not merely poor form: it bans businesses from proposing, using or relying on unfair contract terms in standard form contracts with consumers. Unfair contract terms on standard form contracts after 9 November 2023 are banned and penalties for breaches apply. A court or tribunal can impose substantial penalties on businesses and individuals who include unfair terms in their standard form contracts. A term of a consumer contract is void if it is unfair, and the contract continues to bind the parties if it is capable of operating without the unfair term.

Two limits are worth knowing. First, the unfair terms rules do not apply to the terms that define the main subject matter of the contract or set the upfront price, to the extent that they do so. Second, only courts and tribunals make the decisions: Consumer Affairs Victoria’s wording is that contracts including these kinds of terms are not automatically considered unfair, because only a court or tribunal can decide this. If the contract can operate without the unfair term, it remains binding.

The terms Victoria’s regulator has already taken on

Victoria publishes its record, which is useful because it names the terms in the words of the cases, not in the abstract. Consumer Affairs Victoria says it has worked with health and fitness centres to remove or modify unfair consumer contract terms, including terms that resulted in automatic renewal of memberships without an opportunity to cancel at the conclusion of a minimum term, terms that allowed the centre to vary its services without notice, and terms that penalised consumers for terminating memberships. The same office says it does not consider minimum terms themselves unfair, but is concerned about minimum terms combined with an automatic renewal function in a way it considers unfair.

The document behind that record is a fair trading publication for businesses, and it reads in places like a list of what a gym should not put in front of a member: late fees that do not reflect the centre’s actual cost may be considered unfair, and termination that is not effective until the member has received written confirmation from the centre is a term the office called out. If you are holding a contract and recognise one of these, the section below says where to take it.

What a member can do about a term

Neither the ACCC nor a state regulator rewrites the contract for you. The ACCC is explicit that it does not investigate individual complaints. What the offices advise is to start with the business: if you think a term in your contract is unfair, first try to resolve the issue with the business, and you can ask the business to remove or change a term you think may be unfair. If that does not resolve it, lodge a complaint with NSW Fair Trading or the ACCC, and if the dispute is still not resolved you might be able to apply to the NSW Civil and Administrative Tribunal. In Victoria, consumers may take their own action at VCAT or in a court if they believe a term to be unfair. The cancel guide here carries the complaint doorways state by state.