Terms of Trade and other forms of Contract – Big Brother is watching – Contract Lawyer – Business Lawyer – Dukesons Business Law

September 2018

This Blog isn't legal advice – if you need legal advice on any business law or contract law issue, please contact me. I'm business lawyer or commercial lawyer who provides advice on a wide range of contract law and business law or commercial law issues.

Traders must take seriously their terms of trade and other forms of contract to ensure that they don’t contain unfair contract terms. Traders should also ensure that they don’t engage in misleading or deceptive conduct in trade. The Commerce Commission is policing these matters with some vigour – Big Brother is watching.

It may be that many traders, particularly small businesses, are unaware of the fact that the CC is extremely active at the moment in terms of hunting down unfair traders or traders who have acted misleadingly or deceptively trade. It’s likely that for the most part, the CC will be focusing on traders who have some prominence in the market. But all traders run the risk of coming under the CC’s scrutiny e.g. if enough of their customers complain.

Though it isn’t completely accurate to divide customers into business and non business customers, it’s broadly true to say that where a trader deals with non business customers (consumers), the law now requires that the terms mustn’t be unfair or unreasonable. In addition, certain guarantees will be implied into all such dealings by virtue of the Consumer Guarantees Act and the trader can’t contract out of the Act.

There have now been quite a number of instances where the CC has investigated traders’ contract terms and found them to be wanting. Mostly, the traders have agreed to modify the terms but there is now at least one set of proceedings in train whereby the CC is alleging that a trader’s terms are unfair/unreasonable. The potential fines are large, not to mention the possibility of adverse publicity.

In addition, there are the long-standing provisions of the Fair Trading Act that prohibit misleading or deceptive conduct in trade. Those provisions can be contracted out of where it’s fair and reasonable to do so where the trader’s customer contracts with the trader in trade (basically means in business). But where the trader’s customer is a non business customer, no contracting out is permitted.

Essentially, where there is a largely standard form contract involved, a term will be unfair if it creates significant imbalance between the parties’ rights, the term isn’t reasonably necessary to protect the legitimate interests of the trader, and if relied upon by the trader, the term would cause detriment to the customer.

Traders should have their terms of trade and other forms of contract reviewed particularly where they deal with non-business customers. Otherwise, they take the risk of possibly significant fines and adverse publicity if the terms are found to be wanting. There is some guesswork in determining whether individual terms might be unfair or unreasonable but in that regard, educated guesses are better than no guesses at all.

Some terms might not require significant revision to comply with the legislation - others may require significant revision. To some extent, it also depends on how much risk a trader wishes to take on board.

In some cases, a business customer will be deemed to be a consumer - where they acquire or hold themself out as acquiring goods or services that are ordinarily acquired for personal, domestic, or household use or consumption. This adds a layer of complexity to drafting contract terms where a trader supplies goods or services of that kind to both business and non business customers and where a trader supplies goods or services of that kind to just business customers. As to what are goods or services that are ordinarily acquired for personal, domestic, or household use or consumption, that's another chapter in this story.

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