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Gym contracts, website Ts & Cs that you click to “agree” to, the lengthy terms and conditions you accept every time you enter a competition to win an overseas holiday, each time you download an app, your supermarket’s loyalty card. Each time you agree to these things you enter a contract. Who has time to read all of those terms and conditions? How do you know what you are agreeing to if you don’t read them? Have you unknowingly contracted to sell your firstborn child?
The Fair Trading Act 1986 provides consumers with some protection from unfair terms in standard form consumer contracts.
A contract is a standard form consumer contract where it is prepared by the business, the consumer is an individual (not a business), and the contract is not open for negotiation. Contracts offered to consumers on a take it or leave it basis come under this category.
A contract term will be unfair, and therefore unlawful, if:
- The term causes a significant imbalance between the parties;
- The term is not reasonably necessary to protect the legitimate business interests of the business; and
- If the business were to enforce the term, the consumer would suffer detriment.
Examples of unfair contract terms include:
- A term that allows one party to end the contract but not the other party;
- A term that allows one party to change the terms of the contract, but not the other party; or
- A term that allows one party to change the price payable under the contract, but not the other party.
So while it is certainly preferable to at least skim read any terms and conditions before accepting, there is some protection from really unfair terms.
What to do if you think you’re subject to an unfair contract term?
If you think you are subject to an unfair contract term you should tell the business that you think the term is unfair under the Fair Trading Act and therefore unlawful and unenforceable.
If the business continues to enforce the term against you, you can call the Commerce Commission on 0800 943 600 or make a complaint on the Commerce Commission website. With standard form consumer contracts, it is likely other people will also be affected by the same unfair term.
The Commerce Commission can issue Compliance Advice Letters and Warning Letters where it is concerned a term is unfair. In August 2017, the Commerce Commission conducted a review into the contracts of 10 of New Zealand’s biggest gyms and found many potentially unfair terms. The problematic terms included automatic renewal of the contract without the customers’ knowledge, complicated cancellation processes, early termination fees, and the gym being able to unilaterally decide if a customer had breached the contract. The Commerce Commission provided Compliance Advice to the gyms and it is reported that on the whole they followed that advice.
The Commerce Commission can also apply to the court for a declaration that a term is unfair. The Commerce Commission recently brought High Court proceedings against ticket resale website Viagogo and Auckland mobile trader Home Direct. Viagogo’s contract includes a term stating that all disputes brought by consumers must be heard in Swiss courts, but Viagogo can choose to take court action against consumers in the consumer's own country. Home Direct’s contract includes a term where direct debits continue to be taken after a product has been paid off and the money is converted into vouchers which can only be used to buy Home Direct products.
If you are a business preparing standard form contracts, it is important that your contracts are well drafted and fairly balanced. Terms and conditions should be prepared by a lawyer and legal advice should be sought if any term could be considered unfair.
For more information about this article feel free to contact Rochelle Farmer or our Commercial Team (06 768 - 3752)
About the Author:
Rochelle's work focuses of commercial matters and company and partnership law. She undertakes commercial property transactions, drafting and reviewing commercial agreements, selling and purchasing businesses, and other matters.
Rochelle’s broad experience in commercial transactions, employment law, privacy, and health and safety gives her a unique overview from which to provide thorough and pragmatic advice