SaaS, short for ‘Software as a Service’, refers to the use of a cloud delivery model to provide the benefits of a software-based offering to consumer, business and/or government customers. The customer usually accesses the remotely hosted service via a web or app-based console on an internet-connected computer device.
A key commercial feature of these models is that the customer pays a recurring subscription fee to access the service, charged in advance. Under Australian accounting standards, companies can recognise future “annual recurring revenue” (ARR) when it is “probable” that the future year’s revenue will be earned. Recognition of ARR has positive effects on a company’s valuation, which is particularly important if the company is raising capital or looking to sell or list the business.
Some well-known SaaS success stories that have emerged from Australia and New Zealand, include:
Looking at the Australian market more broadly, it is hard to be certain about the sheer number of SaaS businesses that carry on business down under. Although some recent analyses suggest Australia only has in the order of 400–550 SaaS companies,[1] this seems low. Other data shows higher numbers when including early-stage startups; for example, Tracxn’s sector report shows that Sydney alone is home to over 1,750 companies classified as SaaS.
SaaS providers, especially B2C models, often contract with their customers using a ‘standard form of agreement’ (SFOA). This contracting model is not confined to SaaS, and is extremely common in the Australian market.
SFOAs are especially prevalent for organisations engaging in high volume ‘rinse and repeat’ transactions, where it is not commercially practical to negotiate a tailored agreement with every customer. In the case of SaaS, the contract is typically hosted online, and presented by the SaaS supplier with little expectation or opportunity for the customer to negotiate its terms.
In the SaaS success stories mentioned above, each of Atlassian, Canva and Xero use SFOAs to contract with customers.
Back in 2017, it was estimated that Australia’s two million small businesses on average sign eight SFOAs a year.[2] That is 16m deals being done per annum on standard form paperwork. And in 2025, this number has definitely risen.
SFOAs are regulated by the ACCC under the Australian Consumer Law (ACL). While there is no legal definition of a ‘standard form agreement’ under the ACL, a framework of statutory factors are set out for Courts to consider in determining whether a SFOA exists[3]. These factors include where the party preparing the SFOA:
The ACL protects the supply of goods or services supplied to customers that meet the statutory definitions of a ‘consumer’ or a ‘small business’.
Relevantly for SaaS contracts, a consumer is someone who has purchased goods or services under the contract that are:
Amongst the 2022 changes brought in under the UCT Act, the definition of small business was broadened under the ACL to apply to businesses:
Based on public ABS data, Edwards + Co Legal estimates that there are approximately 2.62m businesses that would meet the definition above.
Whether a term is unfair will be circumstantially dependent on whether the term:
In ACCC v Fujifilm Business Innovation Australia Pty Ltd [2021] FCA 153 (Fujifilm), the Court found 38 terms unfair, including automatic renewal terms, disproportionate termination rights, one side force majeure and broad indemnities for Fujifilm. The ACCC Deputy Chairman Mick Keogh noted that Fujifilm’s terms “allowed this large company to leverage the significant power imbalance… to impose unnecessary and unjustifiable terms on these businesses.”
As we wrote about in our previous articles on Huge Fines for Businesses with Unfair Terms, and Watch your Standards! $50 million Penalties for Unfair Small Business Contracts, breaches of the UCT Act now attract major penalties.
For companies, the maximum fine for breaches of unfair contract terms is the higher of:
For individuals involved, there is a maximum penalty of $2.5m for a person “directly or indirectly, knowingly concerned in” a contravention. Whilst this is yet to be tested by the Courts, risk of personal liability arises for boards and in particular active managing directors who are given a high degree of autonomy.
The Court also has power to declare unfair terms in a SFOA void[6]. Once a term is declared to be unfair, it will be deemed to be void (not operative). However, the remainder of the contract will continue to apply if it can continue without the void term.
It is likely that a very large proportion of the millions of SFOAs formed in Australia each year contain provisions which technically breach the Australian Consumer Law.
It is tempting for parties with the controlling hand to draft SFOAs in a way that is overly favourable to them, and with little pushback from most consumers or small business customers, the contract can easily be unfair.
Why it matters: SFOAs with unfair terms may be reported to the ACCC, and sanctions include declaring terms void, imposing financial penalties and reputational damage to the symbolic capital of the SaaS business. Further it is something that investors will likely perform due diligence on in determining whether to provide equity or debt investment to the SaaS company.
Clauses of SFOAs can be declared void under the UCT if they are found to be ‘unfair’.
Why it matters: When a term of a contract is deemed void, it is treated as if it never existed legally. An example could be an exclusion of the SaaS provider’s liability upon early unilateral termination of the service. In such a case, the contractual protection evaporates and the SaaS service provider may be fully exposed to legal costs and liability.
A provision which might be identified as unfair could be a poorly drafted provision related to the non-refundability of fees upon termination of the contract. In such case the provision may be declared void.
Why it matters: In such a case, not only may the SaaS provider have to refund customer fees, but its entire ARR model may be threatened. That is because this model relies upon the probability of the revenue being retained in order to be booked in the accounts.
Unfair terms attract fines of up to $50m for businesses, or $2.5m for individuals “directly or indirectly, knowingly concerned in” a contravention.
Why it matters: Many SaaS companies are operating on a thin or pre-profit basis. Dominant players like Canva and Atlassian are the exception rather than the rule. A massive fine would push most SaaS businesses into insolvency. Further, there is risk of personal liability which arises for active directors. Whilst the risk of the fines occurring is low, the adverse consequences could be fatal.
The ACCC, as the enforcement agency for the ACL, is known to publicise media releases and reports to highlight misconduct and deter businesses and individuals from behaviour that breaches the ACL. In Australian Competition and Consumer Commission v CLA Trading Pty Ltd[7], the Federal Court ordered Europcar to publish an advertisement in newspapers. In 2025, the power, reach and grapevine effect of social media is such that it can quickly amplify damage to a business found to have breached ACCC protections.
Why it matters: SaaS businesses depend heavily on public reputation (their symbolic capital). Google reviews, Trust Pilot and similar platforms are high watermark examples of these. If a business is found to have unfair terms, it can quickly erode confidence leading to cancellations, reduced sign-ups, and increased churn to competitors. Further, even after compliance is restored, past enforcement actions remain on the company’s digital record.
High-volume SaaS businesses have little choice but to deploy SFOAs as their customer contracting model. However, if drafted poorly, SFOAs pose very significant risks, including the unwelcome attention of the ACCC, voided terms, massive fines for the company and its directors, risks to the entire ARR model and damaging publicity.
If your business is serious about growth, it is essential to take advice from experienced commercial lawyers to ensure the unfair contract regime does not bring your hard work undone. This is not just a defensive shield; expert lawyers can identify upside opportunities within the customer engagement model that can help the business scale and grow.
Does your business use SFOAs? For experienced, specialised advice to help your business shield and scale, please contact Edwards + Co Legal below.
[1] For example, Crunchbase data (via an analysis by Exploding Topics) indicated roughly 408 SaaS companies based in Australia. Similarly, the Latka SaaS database tracked 546 Australian SaaS companies as of 2025.
[2] ‘Small Business unfair contract terms in focus’ ACCC (Media Release, 13 November 2017) <https://www.accc.gov.au/media-release/small-business-unfair-contract-terms-in-focus#:~:text=%E2%80%9CACCC%20engagement%20has%20seen%20tens,%E2%80%9D>.
[3] Under section 27 of the Treasury Laws Amendments (More Competition, Better Prices) Act 2022 (Cth) (UCT Act), which amended the ACL in 2022.
[4] However, these consumer rights do not apply if goods are being purchased to be resold, transformed into a product that is sold, or to repair or treat other goods or fixtures on land, regardless of whether the is under the $100,000 threshold.
[5] Under s 76(1B) of Competition and Consumer Act.
[6] Under the UCT Act and the ASIC Act 2001 (Cth).
[7] [2016] FCA 377.
