If you're a business that deals with customers and you use standard form contracts, you need to make sure your terms are fair.
The Fair Trading Act aims to protect customers against unfair terms in standard form consumer contracts.
If your contract with your customer is for goods or services normally acquired for personal or domestic use, then it is likely to be a consumer contract.
If there is little or no opportunity for your customer to negotiate the terms of the contract with you, then it is likely to be a standard form contract. For example, you may offer a standard form contract on a "take it or leave it basis". It is likely to be the same as, or similar to, contracts you offer to other customers.
The terms used in standard form contracts need to be fair.
Your obligations
The Commerce Commission can take action to stop you using an unfair term in a standard form consumer contract. The Fair Trading Act allows us to apply to the court for a declaration that it is unfair. If the Court declares that a term is unfair, it is an offence under the Fair Trading Act to apply, enforce or rely on it and your business could be prosecuted.
Generally a term in a standard form consumer contract will be unfair if it puts your customers at an unfair disadvantage by creating a significant imbalance in the rights and obligations of you and your customers, if it would cause detriment to your customer if it was relied upon, and if it is not reasonably necessary to protect your legitimate business needs.
Some of your terms may be exempt from the "fairness test" namely those describing the main subject matter and setting the price providing these are clear and displayed prominently. There is also an exemption for terms which are required or expressly permitted by law.
The following short videos and guides provide a starting point for you to understand unfair contract terms and how your business can avoid them with customers. They were adapted for New Zealand law, courtesy of the United Kingdom’s Competition and Markets Authority.
