Mobile phone providers - unfair contract terms

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Unfair contract terms

Mobile phone providers generally use standard form consumer contracts - that is, contracts prepared by the business and offered on a 'take it or leave it' basis.

Under the Australian Consumer Law, a term in a standard form contract may be declared unfair if it: 

  • would cause significant imbalance in the parties' rights and obligations
  • is not reasonably necessary to protect the business
  • would cause detriment (financial or otherwise) to a consumer.

All businesses, including mobile phone providers, should ensure their contracts comply with laws about unfair contract terms.

We have worked with mobile phone providers to encourage the removal or modification of unfair contract terms, including terms that: 

  • give providers the right to vary prices and other terms and conditions but do not allow the consumer to cancel the contract without penalty
  • restrict the liability of the supplier or its employees or agents (for example, allowing the provider to suspend the service without notice or liability)
  • penalise the consumer for breach or termination of a contract (for example, allowing the provider to charge an early termination fee that requires the consumer to pay out the remaining contract price
  • prevent or restrict the consumer's dispute resolution options.

Contracts that include such terms are not automatically considered unfair. We do not decide whether a term is unfair, as only a court or tribunal can decide this.

Consumers may take action at the Victorian Civil and Administrative Tribunal (VCAT), or in a court, if they believe a term is unfair. If a court or tribunal finds a contract term to be unfair, it is considered void and treated as though it never existed. If the contract can operate without the unfair term, the contract will still be binding.

We continue to engage with businesses to ensure their contracts comply with the law. If a business refuses to modify its contracts, we may take further action such as applying to VCAT for a ruling.

Before buying a mobile phone

Understand these terms:

  • service provider: the company that connects the consumer’s mobile phone to a network so they can make calls and send emails
  • premium SMS: text messages used for services such as voting on reality television, competitions and content subscriptions. If consumers choose to send or reply to a premium SMS, they may end up signing up to a service with a very expensive call rate. It can be hard to cancel without it costing more
  • international roaming: using a mobile phone overseas to make or receive calls. This can be expensive. Consumers should read the terms and conditions to know how much they will end up paying for this service
  • 16GB/32GB: these figures usually appear in the plan description and refer to the storage capacity of the mobile phone, not the data download allowance.

Consumers should decide:

  • how many calls and texts they are likely to make
  • how much data they will need. For example, if they check emails or search the internet frequently, they may need a plan with a higher monthly data download allowance - usually 1GB or 2GB per month. Check the service provider's website for more information on data usage
  • how long they want to be in a contract. Contracts can range from 12 to 36 months. If not comfortable signing a contract, consumers can try a pre-paid service first. Once the recharge card runs out, they can choose to stay with that network or choose another one.

Consumers should:

  • shop around and compare the prices, conditions and plans of different network providers
  • get information in writing about services and charges
  • understand the costs if they change or break a contract, or if their phone is broken, lost or stolen
  • read the warranty paperwork to find out what is and isn't covered
  • know how they will be charged if you use their phone overseas
  • look for
    • a mobile phone that is easy to use
    • a plan they can afford
    • a service provider that has good network coverage in their area. 
  • check the service provider’s website or visit their store to see if they will get coverage in the areas they will use the mobile phone
  • check for any extra charges - voicemail, call-forwarding, premium SMS, internet browsing, purchasing apps and international roaming
  • find out about any extra costs for going over the phone call or data allowance limit
  • check whether they have to pay more to cancel a contract before it ends.

Warranties on mobile phones

  • Consumers should keep receipts and contracts as proof of purchase.
  • Retailers and service providers do not have to offer a loan or replacement phone during warranty repairs. However, some have a policy to do so.
  • Depending on the contract terms and conditions, consumers may have to continue paying the monthly bill while their phone is repaired. For more information about warranties, view our Warranties section.
  • Consumers also have rights under Australian Consumer Law. If their mobile phone stops working, they may be able to ask for a refund or replacement. For more information, see our Guarantees that apply automatically page.

Before signing a mobile phone contract

Consumers should:

  • always read the contract and not rely only on what the salesperson says. A mobile phone contract is legally binding. It is usually difficult and expensive to cancel
  • be alert to hidden costs and unfair contract terms
  • never sign a contract they do not understand – it is better to ask someone who understands the contract to explain it
  • check how much the monthly bill will be, plus any additional charges, ensuring they can afford these for the duration of the contract
  • understand that if buying a handset and connection with a retailer, they may be entering into two different contracts - one with the retailer for the handset, and one with the service provider for connection to the network. This means that the retailer can help if there is something wrong with the phone, but not with any network connection problems
  • think carefully before ‘going guarantor’ on a contract for someone under 18 – they will have to pay the bills if the young person cannot
  • learn more about their rights and how to exercise them on our Unfair contract terms page.

After signing a mobile phone contract

Consumers should:

  • keep a copy of the contract in a safe place, so they can refer to it later if necessary.
  • let the service provider know if their situation changes - for example, if their mobile phone is lost or stolen, or they cannot afford to pay the bills.

Managing mobile phone bills

Consumers should:

  • check their data usage frequently – it may help avoid large bills
  • know how much their bill should be and ask their service provider about any unusual charges.
  • if they need help budgeting or calculating repayments, visit the Buying a mobile page on the Moneysmart website.
  • pay their bills on time. If they don’t, they may get charged additional late fees.

When things go wrong

Where to next: