Caution urged for introduction of unfair contract terms
The New Zealand Law Society has advised a cautious and carefully considered approach to the inclusion of the concept of unfair contract terms in any review of consumer law.
The caution comes in comments made by the Society to the Ministry of Consumer Affairs on the ministry’s consumer law review Issues Paper Consumer Law Reform Additional Paper – Unfair Contract Terms, September 2010.
Law Society President Jonathan Temm says the Society considers the proposal to introduce the concept of unfair contract terms into consumer law premature and questions whether it is necessary, considering the remedies readily available to New Zealand consumers.
“The issues paper recommends introducing unfair contract terms largely on the analysis carried out in Australia and the United Kingdom. The Society does not consider that parallels with the United Kingdom market are likely to apply to the smaller and interconnected New Zealand consumer marketplace,” Mr Temm says.
“While a number of parallels exist between the Australian and New Zealand markets, the evidence of detriment from unfair contract terms is largely anecdotal. Further, similarities across both countries of customer behaviour, the types of unfair clauses used and the legislative framework seem to have been assumed from the absence of evidence to the contrary.”
The Law Society says there are significant differences between New Zealand’s consumer law and that of Australia.
“First, New Zealand already has had the statutory, non-contractual Consumer Guarantees Act in force since 1994. New Zealand consumers are accustomed to having rights outside of those given by the contract. Non-contractual guarantees will not be available in Australia until 2011.
“Secondly, New Zealand statute law has provided a relatively simple approach to contract disputes by the codification of formerly complex contract law principles through the Contractual Mistakes Act 1977, the Contractual Remedies Act 1979 and other contract law statutes which are able to be used by the Disputes Tribunals.
“Thirdly, the effect of section 13(i) of the Fair Trading Act 1987 should not be underestimated. This gives Tribunals and Courts the power to strike out a contractual term which has not been clearly brought to the consumer’s attention.”
The Law Society says it believes a cautious approach to the issue is warranted, particularly given the increased transactional costs the introduction of unfair contract term provisions are likely to drive into the market. It recommends that the Ministry of Consumer Affairs carries out some New Zealand-specific analysis before making a final recommendation on whether to implement unfair contract term provisions.