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Consulting on guidelines about unfair contract terms

Commission consulting on guidelines about unfair contract terms

The Commerce Commission has today released draft guidelines on the new provisions of the Fair Trading Act dealing with unfair contract terms. The unfair contract terms provisions were part of recent amendments to New Zealand’s consumer law and will come into force on 17 March 2015.

"The guidelines set out the Commission’s intended approach to enforcing the new provisions. We are holding this consultation well in advance of March 2015, as we want to make sure businesses have plenty of time to run a ruler over their current consumer contracts and get ahead of any issues," said Commerce Commission Chairman Dr Mark Berry.

Unfair contract terms relate to clauses in standard form consumer contracts. The main hallmarks of these contracts are that 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.

“A wide number of businesses use standard form consumer contracts, including finance companies, retirement villages, gyms, telecommunications companies and utilities like electricity and gas. We welcome feedback from businesses on our draft guidelines. But as the new laws will also have an impact on consumers, we encourage feedback from them too,” said Dr Berry.

The Commission invites submissions from interested parties on the draft guidelines. Submissions should be sent touctconsult@comcom.govt.nz by 5pm on 30 September 2014.

The Commission expects to release the final guidelines by the end of November 2014.

The draft Unfair Contract Terms Guidelines can be viewed on the Commission’s website athttp://www.comcom.govt.nz/fair-trading/guidelines/ .

Background

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

The court may declare a term unfair if it is satisfied that the term:

• would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and

• is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and

• would cause some detriment (whether financial or otherwise) to the other party if applied, enforced or relied on.


Some terms cannot be declared unfair. These are terms that:

• define the main subject matter of the contract;

• set the upfront price payable under the contract, to the extent that the terms are transparent; and/or

• are required or expressly permitted by any enactment.


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