How to Spot an Unfair Clause in a Contract

Contracts are a fundamental part of life, whether you're signing a lease, taking a new job, or hiring a contractor. They're designed to protect all parties, but sometimes, a document can contain unfair clauses—terms that heavily favour one side and could leave the other vulnerable. Knowing what to look for can save you a significant amount of stress and money down the line.

What Makes a Clause "Unfair"?

A clause is generally considered unfair if it creates a significant imbalance in the parties' rights and obligations to the detriment of the party who didn't draft the contract. In legal terms, this can sometimes be referred to as an "unconscionable" term, especially when it involves significant procedural or substantive unfairness.

Three Red Flags to Watch Out For

Keep an eye out for these common types of clauses that can spell trouble:

1. The "Take-It-or-Leave-It" Trap (Adhesion Contracts)

While not inherently unfair, contracts that are presented on a "take-it-or-leave-it" basis often called adhesion contracts, require extra scrutiny. These are common with large corporations (think software EULAs or mobile service agreements).

• The Sign: The contract is non-negotiable, and the drafter has superior bargaining power.

• The Risk: The drafter may have included clauses that they know are favourable to them because they are confident you won't be able to change them. Always read the fine print in these situations.

2. Excessive Liability Limitations and Waivers

This type of clause attempts to shield the drafting party from accountability for their own mistakes or negligence.

• The Sign: A clause stating that the company or service provider is not responsible for damages, losses, or injuries that occur even if it's their fault. For example, a gym contract stating they are not liable for any injury you sustain, regardless of whether it's due to faulty equipment.

• The Risk: You could be left footing the bill for a problem caused directly by the other party's actions or inaction. While some liability limits are legal, overly broad waivers of negligence are highly suspect.

3. One-Sided Termination and Amendment Rights

Contracts should generally be terminated or modified through mutual agreement. Watch out for clauses that give one party total, unilateral control.

• The Sign: The contract allows only one party to:

  • Change the terms (price, service, duration) at any time without notice or your consent.

  • Terminate the agreement at any time for any or no reason, while you are locked in.

• The Risk: You could find yourself locked into an agreement whose terms have been negatively changed or arbitrarily canceled, leaving you without recourse.

Practical Steps Before You Sign

Don't just skim the document and sign on the dotted line! Take these steps:

1. Read Every Single Word

Seriously, don't skip the annexures, appendices, or fine print—especially if they contain legal jargon. If you don't understand a term, look it up or ask the other party for a plain-language explanation.

2. Ask "What If?"

Mentally simulate worst-case scenarios and see how the contract addresses them.

• What if they fail to deliver the service?

• What if the product breaks down immediately?

• What if I need to cancel early?

If the contract leaves you completely exposed or provides a remedy that seems disproportionately small, you've likely found an unfair clause.

3. Seek Legal Advice

For high-stakes contracts (real estate, employment, large business deals), consulting a lawyer is an investment, not an expense. A legal professional can quickly identify problematic language and advise you on negotiating a fairer deal or walking away entirely.

Final Takeaway

A fair contract should reflect a true meeting of the minds where both parties have clear rights and responsibilities. If your gut tells you a term is too good for them and too bad for you, trust it. Never sign a contract you don't fully understand or agree with. Your vigilance is your first line of defense against unfair terms.