How to Challenge Unfair Contract Terms

Have you ever signed a contract, only to later feel a knot in your stomach, wondering if you’ve committed to something unfair or one-sided? In New Zealand, consumers often encounter agreements for everything from mobile phones and internet services to gym memberships and home renovations. While contracts are essential for clarity, the reality is that not all terms are created equal. It’s crucial for every Kiwi consumer to understand their rights and how to challenge unfair contract terms. You are not powerless, and knowing your options can save you significant stress, time, and money. This article will guide you through understanding, identifying, and addressing terms that might put you at an unreasonable disadvantage.

Understanding Unfair Contract Terms in New Zealand

New Zealand law provides important protections for consumers against terms that are deemed unfair. This isn’t about simply regretting a deal; it’s about specific legal criteria that define what constitutes an “unfair” term, particularly in standard form consumer contracts.

What Makes a Term “Unfair”?

Under the Fair Trading Act 1986 (FTA), a term in a standard form consumer contract is considered unfair if it meets three key criteria:

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

Examples of potentially unfair terms might include clauses that allow a business to unilaterally change the terms of the contract without notice, impose excessive cancellation fees, or limit their liability for breaches of contract that are not permitted by law. It’s about ensuring fairness and preventing one party from taking unreasonable advantage.

Key Legislation Protecting You

Two primary pieces of legislation are your allies:

• The Fair Trading Act 1986 (FTA): As mentioned, the FTA contains specific provisions relating to unfair contract terms in standard form consumer contracts. These are contracts prepared by one party and presented to the other on a “take it or leave it” basis, with little or no room for negotiation. If a term is declared unfair by a court, it cannot be enforced.
• The Consumer Guarantees Act 1993 (CGA): This Act provides non-excludable guarantees for goods and services purchased by consumers. This means businesses cannot contract out of their obligations under the CGA. For example, if a product is faulty, a contract term stating “no refunds under any circumstances” would likely be unenforceable because it tries to override your rights under the CGA.

Steps to Take When You Spot an Unfair Term

Identifying a problematic term is the first step. Here’s how to proceed:

Review the Contract Carefully

Before you sign, and certainly if you have concerns post-signing, read every word. Don’t just skim. Pay close attention to sections on:

• Termination or Cancellation: What are the fees and conditions?
• Liability: What is the company responsible for, and what are they not?
• Changes to Terms: Can the business change the contract without your consent or adequate notice?
• Hidden Fees or Charges: Are there costs not clearly explained upfront?

If anything seems unclear or overly restrictive, flag it.

Communicate with the Other Party

Often, the simplest approach is to raise your concerns directly with the business. Explain clearly which terms you find unfair and why. Reference the Fair Trading Act or Consumer Guarantees Act if appropriate. Sometimes, a business may be willing to negotiate or clarify a term, especially if it was an oversight or could be improved for customer satisfaction. Always keep records of your communication, including dates, names, and what was discussed.

Seek Independent Advice

If direct communication doesn’t resolve the issue, or if the contract is complex, seeking independent advice is crucial:

• Community Law Centres and Citizens Advice Bureau: These organisations offer free initial advice and can help you understand your basic rights.
• Disputes Tribunal: For disputes involving amounts up to $30,000 (or $50,000 if both parties agree), the Disputes Tribunal offers a fast, inexpensive, and informal way to resolve disagreements without needing lawyers. They can consider whether a contract term is unfair.

What a Contract Lawyer Can Do For You

While the above resources are valuable, for more complex situations or when significant sums are involved, professional legal advice is invaluable. A contract lawyer specialising in New Zealand consumer law can:

• Expertly Assess Your Contract: They can thoroughly review your contract against the FTA, CGA, and other relevant laws, identifying specific unfair terms and explaining their implications.
• Advise on Your Rights and Options: A lawyer can clarify your legal standing, outline the best course of action, and explain the potential outcomes of challenging a term.
• Negotiate on Your Behalf: Lawyers can engage with the other party, articulating your position effectively and aiming for a fair resolution.
• Represent You: If the dispute escalates, a lawyer can represent you in tribunals or courts, presenting your case and arguing for the unfair term to be struck out or amended.

Navigating contract disputes can be complex, and ensuring your rights are protected is paramount. For personalised advice and a thorough review of your specific situation, it’s always best to speak with a legal professional. Contact a contract lawyer to review your agreement today.