Business guide to unfair contract terms

If you are a business that deals with consumers and you use standard form contracts, you need to make sure your terms are fair.

If your contract with your customer is for goods or services normally acquired for personal or domestic use then it is likely to be a consumer contract.

If there is little or no opportunity for your customer to negotiate the terms of the contract with you, then it is likely to be a standard form consumer contract. For example, you may offer a standard form consumer contract on a “take it or leave it basis”. It is likely to be the same, or similar to, contracts you offer to other customers.

The terms used in standard form consumer contracts need to be fair.

Your obligations

The Commission can take action to stop you using an unfair term in a standard form consumer contract. The Fair Trading Act allows us to apply to the Courts for a declaration that it is unfair. A term in your contract that is declared unfair by a court cannot be used, enforced or relied on. If you continue to use or enforce the term you could be prosecuted and face conviction, fines and other legal sanctions.

There are some terms that cannot be declared unfair: terms that describe the main subject matter of the contract, eg, what is being bought and sold and terms that set the upfront price, ie, how much is being charged – provided that the price term is clear and transparent.

There is also an exemption for terms which are required or expressly permitted by law.

Any other terms in a standard form consumer contract can de declared unfair if:

  • it puts your customers at an unfair disadvantage by creating a significant imbalance in the rights and obligations of you and your customers
  • it would cause detriment to your customer if it was relied upon
  • it is not reasonably necessary to protect your legitimate business needs.

The following short introductory videos and quick guides provide a starting point for you to understand unfair contract terms and how your business can avoid them with customers. They were adapted for New Zealand law, courtesy of the United Kingdom’s Competition & Markets Authority.

Quick guide to Fair Terms for your customers (an introductory guide for businessess).

Quick guide to Changing the terms of a contract (variation clauses).

Quick quide to Cancelling a contract: when and how.

Guide quide to Subscriptions and automatic rollovers.

Other guides

Responsibility if things go wrong (limiting or exluding liability)

Terms that may be unfair

More on unfair contract terms

Read our full Unfair Contract Terms Guidelines here.

Read our unfair contract term reviews into the telecommunications, energy retil, and gym sectors here.

Read our consumer information on unfair contract terms here.