Recent changes to the Fair Trading Act in New Zealand make it illegal to include an “unfair term” in standard business-to-consumer contracts and could impact several industries including self-storage. The updated law enables the Commerce Commission to challenge contract clauses in court “if they are unreasonable and create a significant imbalance between companies' and consumers' rights,” according to a report by “The Timaru Herald.”
“The main hallmarks of these contracts are that the terms have been offered to the consumer on a ‘take it or leave it’ basis, and the contracts relate to goods and services that are usually for personal use,” Commerce Commission officials said in a press release.
The new contract-term provisions apply only to contracts signed after March 16, although they may extend to existing contracts that are varied or renewed after March 16, according to the release.
The commission will begin enforcing the new provisions immediately, with no grace period for businesses. “Businesses have had 15 months to prepare for these changes, and we have taken steps to inform them of the laws, including by publishing our guidelines last month,” said Mark Berry, chair of the commission. “We will start targeting contracts in industries that have proven problematic overseas or where we have received complaints in the past.”
Service industries and products that could be impacted include car parking, daycare centers, mobile apps, pay-television agreements, residential construction and self-storage facilities, according to the Herald. The commission didn’t specifically mention self-storage in its release. Instead, Berry identified airlines, fitness centers, online trading, rental cars and telecommunications as example industries under scrutiny.
“We are also concerned about loan contracts, particularly those provided by lower-tier finance lenders that can be harsh on vulnerable consumers,” Berry said.
Insurance contracts were specifically excluded in the updated law, and any contracts negotiated between a company and individual customer are also exempt, according to the source.
The commission will pay careful attention to terms that limit competition, such as automatic “rollover” or renewal terms, and terms that lock consumers into contracts they wish to terminate, preventing them from switching to a competitor, the release said.
Contracts that force consumers to pay early termination fees, without good reason, will likely be targeted, according to attorney Michael Wigley. "There will be plenty of business-to-consumer contracts that will be in breach,” he told the Herald. “My take is [the commission] is not going to mess around, and we will have action within the next few months."
The new provision will make it more difficult for businesses to vary contract terms without giving customers an option to cancel their agreements, the source reported.
The commission has the latitude to pursue court action on its own or after receiving a consumer complaint, according to the release.
The Fair Trading Act was designed to prohibit false and misleading consumer information. The Commerce Commission was created in 1986 to promote competition and enforce related legislation.
- New Zealand Commerce Commission: Commission to Begin Enforcing Unfair Contract Terms Tomorrow
- The Timaru Herald: Watchdog Gets Power to Reject Unfair Contract Fine Print