Wake Up - It could happen to you - Lessons for all Businesses - Commercial Lawyer – Contract Lawyer – Dukesons Business Law
isn't legal advice – if you need legal advice on any business law or commercial
law issue or contract law matter, please contact me. I'm commercial lawyer (business
lawyer) and contract lawyer who provides advice on a wide range of business law
or commercial law issues and contract law issues. This includes advice to help business clients
ensure that they comply with applicable consumer law.
The Potential Issue for all Businesses
Business contracts and business conduct, especially in relation to consumers but also in relation to B2B contracts, have been subject to much attention by the Commerce Commission (CC). That sounds a warning to businesses of all kinds and sizes to ensure that their contracts and their conduct comply with the law.
In addition, businesses dealing with any customers including business customers may pay a stiff price if they engage in misleading or deceptive conduct in trade.
Just recently, a record fine has been imposed on Steel & Tube Holdings Limited and HRV has had a fine of $440K imposed on it. Have you had your core business contracts (including terms of trade) reviewed and are you sure that your practices are legally compliant? Many businesses seem to be remarkably unconcerned.
It you’re in trade, and:
- you deal with “consumers”, and you’re trying to cut corners or to take advantage of customers, or even if your terms are simply too one sided, or
- you engage in any form of misleading or deceptive conduct in trade, or
- you make misrepresentations or unsubstantiated claims,
the CC may come calling and it’s doing the rounds. The CC might investigate off its own back or on the back of complaints from your customers or even from your competitors.
Conduct complained of is often dishonest but dishonesty isn’t necessary for a business to fall foul of the law. Recklessness, carelessness, negligence, and ignorance may render a business liable for making false representations or unsubstantiated claims, or for engaging in misleading or deceptive conduct. Then there’s the question of whether a businesses’ standard form contracts with consumers are unfair.
Some Recent CC activity
- Warning to Apple Sales New Zealand about possible misleading or deceptive conduct in trade
- Successful proceedings against Budget Loans Limited and Evolution Finance Limited for misleading and deceptive conduct in the finance sector;
- Successful proceedings against HRV Clean Water Limited for making unsubstantiated claims and misleading claims about its products and for misleading conduct and misrepresentations;
- Successful proceedings against PB Technologies Limited for not complying with law in relation to extended warranties;
- Charges laid against Spark alleging false or misleading representations in relation to its billing and an offer;
- Successful proceedings against a sole trader for not revealing his dealer status in his online selling;
- Successful proceedings against a MV dealer for failing to display essential information;
- Commencing proceedings against Viagogo alleging false and misleading representations and for unfair contract terms;
- Commencing proceedings against mobile trader Home Direct alleging unfair contract terms;
- Successful proceedings against Brilliance International Limited for false and misleading representations in relation to steel mesh products;
- Warning to Amaysim Operations Pty Limited about possible unsubstantiated claims;
- Commencing proceedings against Vodafone alleging false representations in invoices;
- Commence proceedings against Home Direct limited alleging unfair contract terms;
- Commencing proceedings against Xue Chen alleging misleading representations as to free range eggs;
- Commencing proceedings against Aero Fire (NZ) Sales & Service Limited and Mira Singh alleging false and misleading representations in relation to the installation servicing and maintenance of fire extinguishers;
- Successful proceedings against NZSALE for failing to meet applicable safety standards in relation to products;
- Warning issued to Rapid Loans NZ Limited (Rapid Loans) about failing to comply with responsible lending obligations under the Credit Contract legislation in relation to a loan it issued to a vulnerable borrower.
- Successful prosecution against 1 Dollar Reserve Cars Limited for contracting out of Consumer Guarantees Act warranties in advertisements through trade me when this wasn’t permitted.
- Successful prosecution against Steel & Tube Holdings Limited for false and misleading representations, resulting in the largest fines ever imposed. The issues related to negligence (failure to have proper procedures in place to ensure that what was said was true) rather than dishonesty.
- World” has accepted that it attached misleading labels on its clothing (as to origin) and has entered into enforceable undertakings.
Last year, of note, there were highly publicised actions against Reckitt Benckiser (New Zealand) Limited (in relation to its marketing and sale of Nurofen), several Telcos, and Fujitsu General New Zealand Limited (in relation to its marketing and sale of heat pumps).
You can see that a wide variety of businesses are involved – and the list keeps growing.
Dealing with Consumers
In relation to dealings with consumers, the provisions of the Consumer Guarantees Act and of the Fair Trading Act can’t be contracted out of. The provisions include guarantees that are implied into contracts, provisions as to extended warranties, as to misleading and deceptive conduct and representations, as to misleading and deceptive conduct, as to unsubstantiated claims, and as to unfair contract terms (where a standard form contract is used).
A wide variety of dealings with consumers could come under scrutiny. Just a few examples include retail sales of goods (including online), vehicle hire and vehicle leases, credit contracts/finance contracts, other service contracts (including terms of trade) such as contracts/terms of trade used by telcos and utilities, professional advisers, architects, tradies, gymnasiums, travel agencies - the list is potentially endless and includes any contract whereby a business supplies goods or services to a consumer.
In some cases, consumers may include business customers, so that provisions of the Consumer Guarantees Act and Fair Trading Act will also apply to them. However, where it’s fair and reasonable, the parties can contract out of some of the key provisions of those Acts but not out of the unfair contract terms regime.
In relation to the Fair Trading Act, any misleading or deceptive conduct in trade can be caught including in relation to B2B contracts. It’s possible to contract out of liability for this with B2Bs customers, if it’s fair and reasonable.
What are the risks?
Small and even mid sized businesses might assume that they will fall under the radar and won’t come to the attention of the Commerce Commission. Even if that might normally be the case, if a trader sufficiently annoys a bunch of customers or annoys one or two motivated customers, even smaller traders might come under scrutiny. The chances of this might be increased where a number of smaller businesses/traders belong to an association or group and use the same form of contract or where a trader is a smaller business but has a lot of customers. A competitor might make a complaint to the Commerce Commission.
Fines can be substantial and it isn’t true that any publicity is good publicity. In some cases, management banning orders may be made under the FTA e.g. against company directors.
- you mean what you say and say what you mean, but do it honestly and accurately;
- you ask a good commercial lawyer or contract lawyer to review your contracts (including terms of trade) and your practices. I’m here to help.
- don’t hesitate to contact me if I can help you with any business law or commercial law or contract law issue;
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- feel free to forward a link to this blog to anyone who would be interested.