Be Aware of Proposed Change To Prohibit Unfair Contract Terms in Business Contracts and Unfair Conduct…

Recently, the Ministry of Business Innovation and Employment has been seeking feedback from the public as to whether there is a case for change in regard to unfair terms found in business contracts and unfair practices by businesses.  

New Zealand law currently provides little protection for standard form business contracts. Plenty of businesses are entering into contracts where they have had limited bargaining power to negotiate the terms of the contract. As a result, many businesses enter into contracts with unfair terms.  

The following list provides several examples of terms that could be considered unfair:

• The supplier’s liability is limited;
• The supplier is permitted to change the price, characteristics of the service and/or the terms of the contract;
• Automatic renewal terms with termination fees; and
• Liability on the customer which is above the standard liability.

For example, in most franchise contracts the balance is in favour of the franchisor and there is usually limited bargaining power for the franchisee.

The contract usually provides the franchisor with certain rights to “terminate” the contract at any time, whereas the franchisee usually has no rights to terminate.  

Additionally, protection around “unfair” practices between businesses has been argued to be insufficient because it can allow businesses in some situations to use “pressure tactics and/or deceptive conduct” to get its own way. 

It is always recommended that you seek legal advice before entering into any contract. Certainly, so-called “standard contracts” are by no means necessarily fair.



Claire Tyler
Commercial Lawyer