April 2015...From 17 March 2015, the final stage of an overhaul of consumer laws will come into effect, which will have importance for both consumers and businesses.
This is an opportune time for businesses to consider reviewing their contracts to ensure compliance with the new laws.
Unfair terms in standard form contracts
Changes to the Fair Trading Act 1986 mean that businesses will not be able to rely on “unfair terms” in standard form consumer contracts entered into after 17 March, or in existing standard form contracts varied or renewed after that date (excluding insurance contracts).
Generally, a contract is considered “standard form” if it is pre-written and offered to the consumer on a “take it or leave it” basis, such as contracts used by internet and phone companies, home construction companies, gyms, or retirement villages. “Consumer” contracts relate to the supply of goods or services of a household, domestic or personal nature.
A term may be “unfair” if it:
Examples of a "unfair terms" include the unilateral right of a business to:
Certain key terms are exempt from being unfair, such as the price or main subject matter of the contract.
Consumers who consider a term “unfair” may complain at no cost to the Commerce Commission, who will consider the merits of the claim and, if they agree with the consumer, may seek a declaration from the Courts that the term is unfair. The business will then be unable to enforce or rely on the unfair term, and may be liable for a fine of up to $200,000 for individuals or $600,000 for a company.
Although only standard form consumer contracts are affected by the new laws, business to business contracts are also caught under the rules if the contract is for consumer goods or services that a business is not intending to use in production or for resupply in trade, for example, providing tea and biscuits for staff in a staffroom.
Contracting out of consumer laws:
Other changes to consumer law, rolled out from mid-2014, enable businesses to contract out of both the Consumer Guarantees Act 1993 (CGA) and certain provisions of the Fair Trading Act, where:
In terms of the Fair Trading Act, parties may now contract out of the provisions relating to:
As part of the recent overhaul of consumer law, other rights and obligations have been affected, such as:
To seek further advice, please contact David Robinson, Kate Logan, or Isabella Broadbent, or contact Rosie Clark if you wish to draft new clauses for your contracts