Unfair contracts amendments could impact residential building contracts

On 17 March 2015 the unfair contracts amendments will come into force. The amendments are being enacted under the Fair Trading Amendment Act 2013 and will make unfair terms in standard form consumer contracts unenforceable; there is also the possibility of a financial penalty.

The new regime is modelled on that in other jurisdictions (including Australia). It will only apply to consumer contracts entered into (or renewed) after 17 March 2015 which are of a kind ordinarily acquired for personal domestic or household use or consumption.

The Commerce Commission may choose to review a term and may declare that it is unfair if it finds that the term (a) creates a significant imbalance, (b) is not reasonably necessary to protect the party’s legitimate interests, and (c) would cause detriment if applied.

The Commerce Commission has released guidelines that identify residential construction as one of the industries that often use standard form contracts and may be privy to the regime (click here for the guidelines). Other industries that will be affected by this law change include telecommunication companies and airline services (the latter having already taken steps to comply – click here to read Scoop about Air NZ dropping the preselected insurance option when booking flights).

The extent of the change will be seen once the amendment comes into force and the ComCom begins reviewing contractual provisions.

If you are involved in residential building then the regime is likely to apply to you. If you have a standard contract for construction jobs then it is important that you review this contract to ensure that it does not fall foul of the pending law change.

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