All is fair in Consumer Contracts and Trade - Changes to the Fair Trading Act 1986
The purpose of the Fair Trading Act 1986 (FTA) is to promote confidence and fair competition amongst business and provides a number of rights to consumers. The Commerce Commission works hard to enforce fair and proper trade practices of businesses providing goods and services to the New Zealand market. A recent example being the $840,000 fine recently received by TheMarket.com for misleading conduct (charged under s10 of the FTA).
The Fair Trading Amendment Act 2021 (Amendment Act) came into force on 16 August 2022. The Amendment Act has introduced a further restriction to consumer contracts, extended the scope of business that must now comply and prohibited door-to-door salespeople from entering or remaining on residential property when told to leave.
The Amendment Act now prohibits any conduct in trade that is ‘unconscionable’. The Amendment Act has not provided a definition of what unconscionable conduct consists of, but does provide some guidance for the Courts at s8 of the FTA.
We can expect a similar approach to be taken in the New Zealand Courts as has been in the Australian Courts, where it has been defined as being “against conscience or to offend conscience” (Stubbings v Jams 2 Pty Ltd ).
Small Trade Contracts
Prior to August 2022, the prohibition of unfair contract terms at s26A of the FTA only applied to standard form consumer contracts – this is the contract between a company and the consumer (typically the person at the end of the chain).
The Amendment Act has extended the scope of s26A of the FTA to apply to small trade contracts. The criteria for this is:
- Each party to the contract is engaged in trade;
- The contract is not a consumer contract; and
- The contract does not form part of a trading relationship that exceeds an annual threshold of $250,000 at the time the contract is entered into.
Section 36RA of the Amendment Act states any uninvited direct salespeople must immediately leave the residential property (or not enter) if told to do so by the person residing at the property. A breach of this provision can result in a fine of up to $10,000 for an individual and $30,000 for a business.
How can we help?
Businesses should be taking a proactive approach when drafting and negotiating consumer contracts or contracts that fit the small trade contract criteria.
Holland Beckett Law can review your standard form contracts or provide drafting advice to ensure your contracts are acceptable to commercial standards. If you would like to know more or need help with your contracts please get in touch.