If you are a business that has standard form terms and conditions that are rolled over year after year with little active review, now could be an opportune time to revisit them.
Recent High Court attention on unfair contract terms involving Bachcare, following enforcement action by the Commerce Commission, is a timely reminder that these terms are regulated under the Fair Trading Act. Small businesses are not outside scope simply because their contracts are standard form, widely used, or regarded as industry-common
Who the unfair contract terms regime applies to:
Unfair contract terms rules apply to standard form consumer contracts. That includes terms and conditions that customers usually cannot negotiate, such as online booking terms, subscription terms, or platform user agreements.
A common misconception is that these rules only apply when dealing with consumers. They clearly apply to business-to-consumer contracts where standard terms are used, but they can also apply to business-to-business contracts where:
- the contract is a standard form contract (ie take-it-or-leave-it terms), and
- at least one party is a small business with 20 or fewer employees, and
- the contract value is below:
- $250,000 for contracts of 12 months or less, or
- $1 million for contracts longer than 12 months.
If you are a business that uses template contract terms with customers or smaller suppliers, it is worth assuming the regime may apply and reviewing your terms on that basis.
If a term is declared unfair:
- it cannot be enforced, and
- the Commerce Commission can take enforcement action, including seeking penalties for continued use.
Where risk commonly sits
Common risk areas include:
- terms that allow the business to cancel without offering meaningful remedies to the customer;
- fixed cancellation fees that do not reflect the business’s likely loss;
- broad exclusions of liability where the business cannot perform; and
- silence or imbalance where cancellation is due to circumstances beyond either party’s control, such as weather or other unforeseen events.
These clauses are often included to protect cashflow or manage operational risk, but that alone does not make them fair or enforceable.
A practical sense-check
A useful starting point is to read your terms from the customer’s perspective:
- are rights and remedies reasonably balanced?
- are any fees or forfeited payments linked to genuine loss?
- would the clause still feel reasonable if the roles were reversed?
If a clause feels harsh, surprising or one-sided, there is a real risk it may attract regulatory attention under the Fair Trading Act.
Practical next steps
The Commerce Commission has published clear, business-focused guidance on unfair contract terms, including examples and enforcement insights, which provides a helpful starting point for any review here – https://www.comcom.govt.nz/business/your-obligations-as-a-business/unfair-contract-terms/
As with many compliance issues, the best time to review your terms is before they are tested. Fair, transparent and proportionate terms are not just about compliance, they support trust, reputation and long-term customer relationships.
