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COMMERCE COMMISSION RELEASES UNFAIR CONTRACT TERMS GUIDELINES
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The Commerce Commission has released the final version of its Unfair Contract Terms Guidelines (‘Guidelines’).

The Guidelines outline the Commerce Commission’s approach to enforcement of the new unfair contract terms provisions in the Fair Trading Act 1986, and outline how the Commission will assess whether a term in a standard form consumer contract may be unfair. 

The new unfair contract term provisions apply to all standard form consumer contracts entered into on or after 17 March 2015, and also to standard form consumer contracts (except insurance contracts) that are renewed or varied after that date. Standard form consumer contracts are contracts that include terms that have not been subject to effective negotiation and are essentially offered on a take it or leave it basis. 

A term in a standard form consumer contract that does not meet one or more of the following criteria, may be declared by the Court (on application by the Commission) to be unfair:

  • The term would cause a significant imbalance in the parties’ rights and obligations arising under the contract.  
  • The term is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by it.
  • The term would cause detriment (whether financial or otherwise) to a party if it were applied, enforced or relied on.

In assessing whether a term is unfair the Court must have regard to the contract as a whole and the transparency of the term. The Fair Trading Act includes a list of the types of terms that may be considered unfair. However, the list provides guidance only and is not determinative of whether a particular term that is included or not included in the list will be considered unfair. 

The Commission has reinforced that there is no grace period for implementation of the new unfair contract terms provisions and it will be actively enforcing the provisions once they come into force on 17 March 2015. The Commission has also indicated that initially it will direct its attention towards the following industries and types of contracts:

  • Industries and practices that have proven problematic overseas, or where it has received complaints in the past such as in the fitness, telecommunications, rental car, airline and online trading industries.
  • Contracts causing harm to vulnerable consumers in the consumer credit area. 

All businesses that enter into standard form consumer contracts should review their terms if they have not already done so to ensure that they comply with the Guidelines, and continue to monitor developments in this space. 

To view a copy of the Commerce Commission’s Unfair Contract Terms Guidelines, please click here

If you want to discuss any issues relating to the Guidelines please contact Hayley Miller or Hayden Wilson at Kensington Swan.

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