Guides to help businesses avoid unfair contract terms

9 May 2018

New videos and quick guides to help businesses avoid unfair contract terms

The Commerce Commission has launched a new series of videos and quick guides targeted at businesses to help them avoid unfair contract terms in their standard form consumer contracts.

The Fair Trading Act prohibits contract terms in standard form consumer contracts which create a significant imbalance in the rights and obligations between companies and consumers, cause detriment to consumers, and are not reasonably necessary to protect the legitimate interest of the business.

Commissioner Anna Rawlings said consumers enter into a number of contracts every day without necessarily realising it.

“Every time you hire a car, book a flight, join a gym, or get a mobile phone, that’s a legal contract. The unfair contract term provisions are designed to make sure that these one size fits all, take it or leave it agreements strike the right balance between the rights and obligations of companies and consumers.”

The guides provide tips to businesses on terms that may be unfair such as unilateral variation and cancellation clauses, subscriptions and automatic renewals, and clauses that specify where responsibility lies if things go wrong.

“These quick guides are targeted particularly at small businesses, from your local plumbing or sports club to beauty therapist. They are designed to draw their attention to the unfair contract term provisions and their need to get legal advice to ensure their contracts are fair.”

The material has been adapted for New Zealand law by the Commerce Commission using material first developed by the United Kingdom’s Competition & Markets Authority (CMA) in relation to the UK’s unfair contract terms legislation. It is being made widely available to a range of government, legal, business, and consumer advocacy groups.

The videos and quick guides can be found here.

Background

The videos and guides are part of a broader programme of work on unfair contract terms. The Commission has also looked into standard form consumer contracts in telecommunications, energy retail, and gyms to assess their compliance with the law. It has also engaged with a number of providers of pre-paid transport cards in relation to their standard form terms and conditions.

Under the unfair contract term provisions, only the Commerce Commission can ask a court to make a declaration as to whether a term is unfair. If a court decides a term is unfair, a business cannot enforce it. If a business continues to use a term that has been declared unfair by a court, it is liable for prosecution by the Commission.

If consumers wish to complain about a potentially unfair contract term, they should contact the Commission on 0800 943 600 or fill out a complaint form.

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