T’s and C’s Apply

We are constantly bombarded with ‘special’ offers, designed to open wallets and overcome objections to spending. These offers look and sound amazing, until the last little line – terms and conditions apply (or on radio, to make it sound chatty and low key; “usual Ts & Cs apply”).

But what exactly are these little conditions? Most people agree to them without reading the fine print – there is just so much of it. However, a new study advises caution – chances are, you’ve signed up to terms recognised by a new law as unfair. And here’s the rub: even if you recognise their unfairness, you can’t make a complaint. Worse still, unless the Commerce Commission challenges them – and a court finds them unfair – the courts and tribunals must enforce unfair terms against consumers.

Experts are calling for a law change to protect consumers following a study that found unfair terms were rife in “terms and conditions” contracts for many everyday services, from hairdressers to digital music, and airlines to energy. There was a change to the law in 2015, which aimed to modernise consumer law and make contracts fairer, but there is still room to improve.

Under an amendment to the Fair Trading Act, contract terms are considered unfair in a contract between a business and a consumer if:

•  they would cause significant imbalance in the two parties’ rights and obligations
• are not necessary to protect a legitimate business interest and
• would cause detriment to the consumer

Common examples of unfair terms include:

• having to pay termination fees if you want to cancel a contract after it is automatically renewed,
• having to pay after the business puts up its price
• or the business makes other unilateral changes to its terms

Researchers analysed retail contracts before and after the law changes. They found:

• Before the law change, all the contracts contained unfair contract terms
• After the law change, only 33 percent of contracts had been changed to try to comply with the new law
• All contracts still contained at least one unfair term – 1,086 unfair terms in total
• Large companies were more likely to have made changes (39 percent) compared to small companies (27 percent)
• More than half of contracts gave businesses the freedom to vary prices and/or the provision of goods and services at any point
• These contracts still compelled consumers to pay termination fees and charges if they wanted out following the changes
• Only nine per cent of businesses allowed the consumer to cancel the contract without paying fees or charges
• Some companies still state that they’re not liable for any loss or damage arising from their goods or services (a breach of the Consumer Guarantees Act and the Fair Trading Act)

Associate Professor Alexandra Sims, Head of Commercial Law at the University of Auckland Business School says, “The Unfair Contract Terms law is clearly not working.

“What’s more worrying, is that consumers cannot challenge unfair contract terms – only the Commerce Commission can. And unless an unfair term also breaches another part of the Fair Trading Act or the Consumer Guarantees Act, courts and tribunals are actually obliged to enforce an unfair term against the consumer.”

Associate Professor Sims says the New Zealand law needs to be fully brought in line with Australian law. In Australia, unlike New Zealand, both consumers and regulators can challenge unfair contract terms, and consumers can do so in the Australian equivalent of the Disputes Tribunals.

Another major difference is that in Australia, but not New Zealand, fees and charges can be complained about.

“Unsurprisingly, the biggest complaint over unfair terms in Australia has been over fees and charges, and there’s no reason to think it would be any different here,” says Professor Sims.

“The law must be changed to allow consumers to challenge unfair contract terms in both the Disputes Tribunal and the courts, and to challenge fees and charges – as is the case in Australia.”