Businesses are protected from unfair contract terms in common types of take-it-or-leave-it standard form contracts like those for power and phone.
The rules cover standard form contracts between businesses that form part of trading relationships with an actual or expected total value of up to $250,000 in any 12-month period (small trade contracts).
An amendment to the Fair Trading Act means that the rules now also cover standard form contracts between grocery suppliers and certain regulated grocery retailers; these are standard form contracts that form part of trading relationships with an actual or expected value of $1 million in any 12-month period (grocery supply contracts).
The Fair Trading Act describes small trade contracts and grocery supply contracts together as “specified trade contracts”.
Terms of Specified Trade Contracts must be fair
Specified trade contracts are contracts which generally aren’t negotiated and are in a standard form.
Remember that contracts are legal agreements and it’s important that you read the whole contract through carefully. Check that you understand what is expected of you and of the other business or party to the contract. Ask questions and seek independent advice if there is anything you are unsure about or do not understand. If a business gives you an explanation of terms or words in a contract, ask for the explanation to be put in writing and attach it to the contract.
Only the Commerce Commission can take action to stop a business using an unfair term in a small trade contract. We can apply to the court to have a term declared unfair and if a court decides the term is unfair, that part of the contract will not be legally binding on you. However, any person is able to apply to the court for a declaration that a term in a grocery supply contract is unfair.
You can contact us about a contract term you think is unfair on 0800 943 600 or report a concern online.
We have produced a guide to help you understand unfair contract terms and how your business can avoid them. We are currently updating our guidelines to reflect the recent amendment to the Fair Trading Act relating to grocery supply contracts.
