With the Unfair Contract Terms (UCT) reforms now past the two-year mark, courts are increasingly being asked to apply the regime in commercial disputes involving standard form contracts. For additional information on how the UCT regime works, please refer to the article series here.

In Tomasso v IG Markets [2025] WASC 338 (Tomasso), the Supreme Court of Western Australia considered the regime in the context of clauses governing investments in the options market. The key issue was whether a term allowing one party, but not the other, to unilaterally cancel or amend a transaction for “manifest error” breached the UCT provisions.

The facts of Tomasso

IG Markets operates an online trading platform which offers, among other things, binary options as an investment. Binary options have an ‘all or nothing’ payment profile, such that there are only two possible outcomes. A client either ‘wins’ or ‘loses’ depending on whether an event transpires, which was the subject matter of the binary option. For example, a client may invest in a binary option that anticipates Company X’s share price being above $2 on 1 November 2025 at 12:00pm. If this situation transpires, the client will ‘win’. Given the highly speculative nature of binary options, they often resemble gambling more so than traditional investing.

To test new features on its platform, IG Markets operated several internal test markets that were not intended for client trading. On 16 and 17 April 2020, IG Markets ran one such market, referred to as the “Test FX UP”, which moved in uniform, upward increments. Because this was a controlled test environment with predictable price movements, it was never meant to be accessible to clients. However, due to an inadvertent employee error, Test FX UP was made publicly available during that period.

Mr Tomasso made a total of 19 transactions in the Test FX UP market, accumulating profits of $5,518,251.44. On the afternoon of 17 April 2020, IG Markets blocked Mr Tomasso’s account and reversed the transactions, leaving him with a balance of approximately $1,579.56. To reverse the transactions, IG Markets relied on a clause 11 (referred to in the judgement as “Term 11”) of its standard form contract, which Mr Tomasso had agreed to when opening an account with IG Markets.

Term 11 granted IG Markets the unilateral right to “either void from the outset or amend the terms of any transaction which contained or was based on an error which IG Markets reasonably believed was obvious or palpable”, provided that IG Markets acted “in good faith according to what it reasonably believed was fair in the circumstances” when exercising this right.¹

Mr Tomasso commenced court proceedings against IG Markets seeking payment of $5,518,251.44, submitting that Term 11 was an unfair contract term and thus void under the ASIC Act. Ultimately, the court agreed with Mr Tomasso – Term 11 was found to be an unfair contract term and Mr Tomasso was entitled to the $5,518,251.44 in profits.

When is a term unfair for the purposes of the UCT regime?

A term of a consumer or small business contract is unfair if the following conditions are satisfied:

1. the term creates a significant imbalance in the parties’ rights and obligations under the contract;
2. the term is not reasonably necessary to protect the legitimate interests of the advantaged party; and
3. the term would cause detriment (whether financial or otherwise) to the disadvantaged party if it were applied or relied on.²

When looking at these conditions, a court may take into account such matters as it thinks relevant, but must take into account:

1. the extent to which the term is transparent; and
2. the contract as a whole.³

Why was Term 11 found to be unfair?

The Court held that Term 11 was an unfair contract term under the ASIC Act because it created a significant imbalance in the parties’ rights, which was not reasonably necessary to protect a legitimate interest. This was because:

• The term gave IG Markets discretion to void or amend transactions based on manifest error or a manifestly erroneous transaction, without granting clients equivalent rights. Not only were there no reciprocal rights in the client’s favour, but other clauses expressly removed a client’s ability to amend or void a transaction where the client had made an obvious error (referred to by the Court as a “fat finger” error).
• IG Markets asserted that Term 11 was drafted to protect its “financial interests” and “other risks associated with a transaction based on manifest error”, specifically, to avoid financial loss, protect its broader financial and business risks, reputational risk and regulatory risk.⁴ IG Markets further argued that because there were contractual limitations on when the power could be relied on, and because that power had to be exercised in good faith, Term 11 was proportionate and reasonable. The Court was not convinced by IG Markets’ argument. In the Court’s view, in the particular context of the agreement and in light of alternatives that could have been employed by IG Markets to protect its legitimate interests in other ways, Term 11 was not reasonably necessary to protect its legitimate interests. A term which voided the transaction from the outset or enabled a client to request an amendment to a transaction would have been more balanced and still mitigate the risks identified by IG Markets.⁵
• Transparency is a key consideration under the UCT regime. Courts are required to consider the extent to which a term is transparent,⁶ including the language used to express a term, whether the term is legible, presented clearly, and readily available. In Tomasso, Hill J considered the language used, the heading of Term 11 and whether it captured the subject matter of the term, and the use of bold words to draw clients’ attention to particular clauses. While IG Markets had used these tools effectively, the Court confirmed that transparency alone is not enough to save an unfair term; an unfair term expressed with clear and concise language is still unfair.
• As part of the UCT analysis, Hill J also referenced the list of potentially unfair terms that are listed in section 12BH(1) of the ASIC Act. A similar list is contained in section 25 of the Australian Consumer Law. These lists are also known as the “grey list” because the examples are shaded in a grey text box. The specific terms pointed to by Hill J from the grey list, which were relevant to his analysis were as follows:

12BH(1)(a) a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract;

12BH(1)(h) a term that permits, or has the effect of permitting, one party unilaterally to determine whether the contract has been breached or to interpret its meaning; and

12BH(1)(m) a term that imposes, or has the effect of imposing, the evidential burden on one party in proceedings relating to the contract.

Practical takeaways

The decision in Tomasso is a reminder for businesses using standard form contracts to ensure their terms are balanced or, where one-sided or unilateral terms must be imposed, to ensure that such terms only go as far as reasonably necessary to protect the legitimate interests of the business.

Equally, this decision is a useful reminder for contract drafters: simply sprinkling words like “reasonable” or “good faith” into a clause will not necessarily cure an underlying imbalance. Where a term gives one party a unilateral right, these qualifiers often prove too little, too late.

Tomasso reinforces that risk management alone will not justify an unfair term. When drafting, businesses should ask a simple question: if the other party had the same rights, would we accept them? If the answer is no, the clause likely creates an imbalance. In that case, consider whether the legitimate interest can be protected through alternative provisions that share rights more evenly between the contracting parties.

How can we help?

We have a dedicated contracting and consumer law team that can assist you with contract preparation and review and can provide you with advice on your rights and obligations under the Australian Consumer Law, including in relation to the unfair contract terms regime. Please contact us if you would like more information about the services we provide.

This article was written by Teresa Torcasio, Partner, and Kaitlyn Firnigl, Solicitor. 

¹ Tomasso v IG Markets [2025] WASC 338 at [15].
² Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act), s 12BG(1).
³ ASIC Act, s 12BG(2).
⁴ Tomasso v IG Markets [2025] WASC 338 at [206].
⁵ Tomasso v IG Markets [2025] WASC 338 at [221].
⁶ ASIC Act, s 12BG(2).