Can the regulator fine a gym for unfair contract terms?

Jurisdiction: Australia • Practice Area: Employment Law• Published October 22, 2026

The situation

I signed a two-year gym membership contract in Sydney last November. The fine print includes a clause that allows the gym to freeze my membership for any reason and prevents me from receiving a refund for the remaining balance if they do so. I specifically asked the manager about this clause before signing, but they claimed it was a standard term that all members must accept. I feel this is an unfair term that puts me at a disadvantage and seems to exploit customers. I would like to know if the government can fine this gym for including such an unfair term in a standard form contract, and whether I am eligible for any compensation or restitution if such a penalty is imposed by the court regarding this specific agreement.

Quick Summary

Yes, the regulator can apply to have a court fine the gym if the membership clause is found to be an unfair term in a standard form contract. You may also be eligible for compensation if the court orders the gym to redress your losses.

Detailed Analysis

Under the law, a term in your gym membership contract is considered 'unfair' if it causes a significant imbalance in the rights and obligations of the parties, is not reasonably necessary to protect the gym's legitimate interests, and would cause you detriment (such as financial loss) if applied [cite:au-competition-consumer-2010-sch2-sec24]. Because your membership is a 'standard form contract'—which is a 'take it or leave it' agreement where you cannot negotiate the terms—the gym cannot legally include unfair terms [cite:au-competition-consumer-2010-sch2-sec23]. The clause you described, which allows the gym to freeze your membership for any reason without providing a refund, may be an unfair term. Specifically, it might be viewed as "a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract" [cite:au-competition-consumer-2010-sch2-sec25]. This means the gym can stop providing the service they promised without being held accountable to the original agreement. If a court is satisfied that the gym has contravened the law by proposing or relying on such an unfair term, the court may order the gym to pay a "pecuniary penalty" [cite:au-competition-consumer-2010-sch2-sec224]. A pecuniary penalty is a financial fine paid to the government. For a company, this fine can be very large, potentially reaching millions of dollars or a percentage of their turnover [cite:au-competition-consumer-2010-sch2-sec224]. Regarding your personal compensation, the regulator can ask the court to make orders to "redress, in whole or in part, loss or damage that has been caused... to any person" by the unfair term [cite:au-competition-consumer-2010-sch2-sec243b]. Redress means to set right a wrong or provide compensation. This means if the regulator takes action, you could potentially receive your money back. However, whether the court actually grants this depends on the specific facts of your case and the court's discretion. It is currently uncertain whether your specific clause meets all the legal requirements to be declared unfair, as this requires a court to weigh the gym's legitimate interests against the imbalance caused to you.

Statutory Citations

Legal Citation: Competition and Consumer Act 2010 (Schedule 2 ACL) § Schedule 2, Section 224 — Pecuniary penalties
"the court may order the person to pay to the Commonwealth, State or Territory, as the case may be, such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the court determines to be appropriate"
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Legal Citation: Competition and Consumer Act 2010 (Schedule 2 ACL) § Schedule 2, Section 24 — Meaning of unfair
"A term of a consumer contract or small business contract is unfair if: (a) it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and (c) it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on"
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Legal Citation: Competition and Consumer Act 2010 (Schedule 2 ACL) § Schedule 2, Section 243B — Orders made on application of the regulator to prevent and remedy unfair contract terms
"to redress, in whole or in part, loss or damage that has been caused, or to prevent or reduce loss or damage that is likely to be caused, to any person by a similar term that is included in any existing contract"
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Legal Citation: Competition and Consumer Act 2010 (Schedule 2 ACL) § Schedule 2, Section 25 — Examples of unfair terms
"a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract"
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Important Legal Disclaimer

General legal information, not formal legal advice. The information provided on LawAsked does not constitute formal legal advice and creates no attorney-client relationship. If you require legal assistance, please consult a licensed attorney in your jurisdiction.

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