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Unfair terms in standard form contracts prohibited from today

By Claire Barron - 17 Mar 2015

Does your business use standard form consumer contracts? If so, you need to be aware that unfair contract terms will be prohibited in standard form consumer contracts from today (17 March 2015).

A term will be considered unfair if it:

  • causes a significant imbalance in the parties' rights under the contract; and
  • is not reasonably necessary to protect the legitimate business interests of the person who would be advantaged by it; and
  • would cause detriment if relied on.

Terms that define the main subject matter or set the upfront price of the contract are exempt from being unfair. Terms that the law expressly allows you to include are also exempt. 

The Fair Trading Amendment Act 2013 provides a "grey list" of terms that are likely to be unfair. This list includes terms we come across frequently in standard form consumer contracts, such as the right for one party to vary or renew a contract without the other party's consent. While these terms may not always be unfair, they need to be carefully considered.

The Commerce Commission is responsible for enforcing unfair contract terms legislation and has indicated that it will begin by targeting industries that have proven problematic or where it has previously received complaints. These industries include telecommunications, rental cars, fitness, airline and online trading.  The Commission will also be looking closely at loan contracts provided by lower-tier finance lenders.

If your business uses standard form consumer contracts, and you have not already had your terms reviewed, we can help.

Contacts

Claire Barron

Craig Nelson

 

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