Unfair clauses ruled out of consumer contracts

New consumer laws which took effect this week made it unlawful for ''unfair'' terms to be included in standard form consumer contracts, Anderson Lloyd partner Sarah Simmers said.

The aim of the law change was to prevent businesses from including one-sided, unfair clauses in their standard form consumer contracts.

The new laws targeted standard form consumer contracts, such as pre-prepared contracts offered on a ''take it or leave it'' basis, she said.

Examples included contracts for gym memberships, mobile phones, parking, rental cars and flights.

''The new laws make it unlawful for unfair clauses to be buried in the fine print. This recognises a person buying those services has no real ability to negotiate changes to the supplier's standard terms and conditions.''

The new laws came in the form of an amendment to the Fair Trading Act 1986, Ms Simmers said.

The Commerce Commission, which would police the new laws, had issued guidelines about the type of clauses it considered were unfair. One example was a clause allowing a business to increase its pricing if the customer was locked in and could not cancel.

''The key message for businesses is they need to check their terms and conditions now, to ensure they are balanced and do not include unfair terms,'' she said.

The new laws targeted consumer contracts but the definition of consumer contracts was wide and would also catch some business-to-business contracts, she said. Where businesses acquired goods or services that were usually for personal use, they would receive the benefit of the new protections. That could include a business buying an appliance or entering into phone contracts for its staff.

The commission announced there would be no grace period with the new laws, which came into force on Tuesday. A business with unfair terms in breach of the new laws could face court action by the commission.

Continued use of a term declared unfair could result in fines of up to $600,000 Ms Simmers said.

 

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