Unfair Contract Terms – are you ready?


This week the Commerce Commission published its final Unfair Contract Terms Guidelines and its approach to enforcing the new unfair contract terms law when it takes effect next month.  This relates to clauses in standard form consumer contracts where the terms have been offered to the consumer on a ‘take it or leave it’ basis, and the contracts relate to goods and services that are usually for personal use. 

Unfair contract terms will be prohibited in all standard form consumer contracts entered into on or after 17 March 2015, and also in those contracts (except insurance contracts) that are renewed or varied on or after that date. 

The unfair contract terms provisions allow the Commission to seek a declaration from a court that a term in a standard form consumer contract is unfair. While only the Commission can apply for a declaration, any person may file a complaint with the Commission on any contract.
Generally speaking the court may declare a term unfair if it is satisfied that the term causes a significant imbalance in the party’s rights and obligations and isn’t necessary to protect the legitimate interests of one of the parties.

The Commerce Commission guidelines issued this week are intended to help businesses comply with the law.  Businesses have been given 15 months warning to give them time to prepare for them and its now important you note there is no grace period and from the 17th March the Commission will be enforcing the new laws.  In fact they have stated their initial focus will be on industries commonly falling into the categories including telecommunications, rental cars, fitness, airline and online trading.

The Commission issued draft consultation guidelines in July last year and received approximately 30 submissions back. The guidelines have now been finalised and are available on the Commission’s website.  

A fact sheet for consumers that will enable them to identify unfair contract terms is also being developed and will be released shortly.

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