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3 min read - September 23, 2022

Are your standard form contracts compliant?

We recently wrote about the, then-upcoming amendments, to New Zealand’s Fair Trading Act 1986, including to NZ’s unfair contract terms regime.  As of 16 August 2022, those amendments are now in force. It is now more important than ever to consider whether your standard business T's and C's are compliant.

So, what’s changed?

Previously, our laws contained protections for consumers against “unfair contract terms”.  The new amendments mean that these protections now also apply to small trade contracts. We expand on this in our earlier publication, but in short these are contracts which are:

(a)   Between parties in trade;

(b)   Standard form (i.e., there is no opportunity to negotiate); and

(c)   Relate to a trading relationship worth less than $250,000.00 per year.

A term will be deemed unfair if the Court is satisfied: that the term would cause a significant imbalance in the parties’ rights and obligations arising under the contract, the term is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, and the term would cause detriment to a party if it were applied, enforced or relied on.

What might an unfair contract term look like?

Clauses that limit or extremely reduce liability, onerous terms that are “buried” or hidden in a contract, or terms that penalise for termination following price increases are all potential examples of unfair terms.  Importantly, it is not only the content of your T's and C's that is relevant, but also how you present them.  You should always consider:

(a)   what your business reasonably requires to protect itself; and

(b)   how this is conveyed.

What happens if my T's and C's contain an unfair term?

The Commerce Commission can take action to stop you using an unfair term by applying to the Court for a declaration of its unfairness. If the Court declares it is unfair, and you continue to rely on that term, you could be prosecuted and fined up to $600,000 (or $200,000 in the case an individual).

How can I ensure I’m compliant?

If you deal regularly with other businesses or customers and you use standard form contracts, now is the time to review your standard wording, both content and placement-wise.  If you are worried about your T's and C's, are unsure if you are captured, or would like assistance with preparing your T's and C's, please get in touch.

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