However, there is an exception where you may be able to contract out of some of your obligations when dealing with other traders.

The general rule: no contracting out

Traders are bound by the Fair Trading Act (FT Act) despite any agreement to the contrary. So, even if a consumer signs or agrees that they have no rights or their rights are limited under the FT Act, you will not be able to hold them to it.

If you are later found to have misled the consumer, you will have breached the law.

The exception: parties in trade

The limited exception for traders to contract out of certain sections of the FT Act is where:

  • both parties are in trade
  • the agreement is in writing
  • it is fair and reasonable for them to agree to contract out of the FT Act.

Is it fair and reasonable to contract out?

The test as to whether it is fair and reasonable for a trader to contract out sections of the FT Act aims to protect weaker parties from making an agreement where they lose their FT Act protections.

When a court is deciding if an agreement to contract out is enforceable, it will take into account things like:

  • what is the agreement about?
  • how valuable are the goods or services or interest in land?
  • did one party have more bargaining power than the other when the contract was being signed?
  • was each party able to negotiate the terms of the contract?
  • was one party required to either accept or reject the agreement on the terms and conditions set down by the other party?
  • did the party wanting to rely on the contracting out clause know they were making a misrepresentation that would have breached the FT Act?
  • did either party get legal advice?

If, after considering the above, a court decides an agreement to contract out is fair and reasonable, the contracting out clause remains valid. This means that neither party in the agreement can take action against the other for breaching the law.

However, the Commission can still take action against a business for breaching the law, even if a contracting out clause applies to the agreement.

What can a business contract out of?

Below are the sections of the law a business can contract out of if the agreement was fair and reasonable:

  • section 9, which prohibits misleading and deceptive conduct generally
  • section 12A, which prohibits unsubstantiated representations
  • section 13, which prohibits false or misleading representations
  • section 14(1), which prohibits false or misleading representations in connection with the sale or grant of land.