Don’t Get Caught With Your Pants Down – at least 1 in 5 online Ts&Cs do not comply with the new unfair contract terms regime

POSTED BY
Rick Shera
02 October 2014

posted in Contract Law | Fair Trading Act

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We’ve touched before (Consumer Law Update - Unfair Contract Terms) on the major changes to the Fair Trading Act 1986, including new “unfair contract terms” rules, which come into effect on 17 March 2015.

We were interested to see though how New Zealand websites rated now. Not that well, we’re sorry to say.

We checked the Ts&Cs on 80 large and small New Zealand business websites from a range of industries. Around 20% of Ts&Cs contained one or more terms we think a Court would declare unfair.

A common example was a very one sided limitation or even total exclusion of liability, in some cases even where the supplier is in breach of the contract or totally at fault. We also found clauses allowing unilateral retrospective change to the terms without notice and unfair dispute or returns policies. In similar overseas regimes, regulators have targeted these types of terms. That’s a problem for these sites.

From 17 March 2015, our regulator, the Commerce Commission, can apply for a term in a supplier’s standard form consumer contract to be declared “unfair” by a New Zealand Court.

A supplier’s Ts&Cs or terms of use appearing on its website where goods or services are offered to the public are a standard form consumer contract. This also applies to printed contracts and printed notices such as returns policies. A consumer doesn’t have an opportunity to negotiate the terms with the supplier; it’s a “take it or leave it” deal.

The new changes try to rebalance the unfairness that can result from this one-sided contracting process, particularly online.

Once a term in a standard form consumer contract has been declared “unfair” by a Court, the supplier must immediately remove or modify the offending term in all consumer contracts going forward, or as directed by the Court (including immediately amending its Ts&Cs on its website). Failure to do so will expose a company to a $600,000 fine, or an individual trader to a $200,000 fine.

Having to admit terms are “unfair” is embarrassing enough, but that may not be the worst of it. An unfair term will also not be able to be enforced against any of your customers. So, for example, if you’ve got a very one sided limitation of liability clause and that is held to be unfair, for customers who have already contracted with you, you may find your liability becomes completely unlimited. The unfair limitation clause is effectively deleted and you can’t retrospectively impose a new, fairer, limit when the contract which they are operating under is the old one they entered into when they clicked “I agree”.

March next year is not far off. If you need to change your Ts&Cs, not only will you need them revised, which may take some time, but you will also need to consider a fair process for putting them in place with both new and existing customers. That may involve online and offline changes if you use multiple sales channels. How you do that will depend in part on whether your current Ts&Cs allow you to change them and, if so, how. You may also need a communication plan to make sure the changes are perceived positively.

None of this can be left to the last minute.

POSTED BY
Rick Shera
02 October 2014

posted in Contract LawFair Trading Act

VIEWED 3488 TIMES

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