Regulator cracks down on potentially ‘unfair’ contract terms
Following complaints to Consumer NZ by affected customers, the Commerce Commission (Comm Comm) has now filed for a High Court declaration that some of Bachcare's Ts & Cs regarding cancellation and unavailability are unfair. Comm Comm alleges that these terms could result in the guest losing the entire amount paid, along with service fees, regardless of who cancelled or the reason and timeline for the cancellation. Airbnb is not being pursued, but it did change its wording after these types of complaints surfaced.
These proceedings highlight that Comm Comm is now using the tools created by last year’s amendments to the Fair-Trading Act 1986. Briefly, a term is unfair if it:
- causes a significant imbalance in the parties’ rights and obligations;
- is not reasonably necessary to protect the party who is advantaged by the term; and
- would cause detriment to the other party.
If Comm Comm considers a standard form contract term to be unfair, it can apply to the District or High Court (on its own initiative or at the request of an affected party for a declaration). If declared an unfair contract term (UCT), the company is then prohibited from using it. Any terms that are declared to be UCTs must not be used or relied upon. If a trader continues to use such a term after it has been declared a UCT, it may face fines of up to $600,000 (or $200,000 in the case of an individual).
It is highly important to ensure your standard contract terms are reasonable, equitable and do not include biased, hardline cancellation clauses or refund policies. Comm Comm’s Chair has stated that they, “expect businesses to have contracts that do not put consumers at an unfair disadvantage.”
Please get in touch if you would like assistance reviewing or updating your Ts & Cs.