Crimson Education’s unfair contract terms

Melissa* got in touch with the Consumer NZ advice line concerned about the contract terms to sign up her 12-year-old with university admissions consultants Crimson Education.

Crimson Education was set up by wonderkid Jamie Beaton and has such luminaries as Sir John Key, Barbara Kendall and David Cunliffe as advisors. The start-up company was recently valued at $1 billion, according to a report in the NZ Herald.

Melissa had gone to Crimson because she was unfamiliar with the education system. Her child is keen to attend an overseas university, so Crimson’s pledge to support students with college applications for the United Kingdom and the States looked promising.

Melissa contacted Crimson, had a chat and then got put onto a salesperson to discuss her child’s goals. The salesperson recommended Melissa’s child sign up for the two-year Rise programme, followed by an additional five years of support to help them get into the university they wanted.

“Crimson is obviously very good on the marketing side, advertising themselves as providing opportunities or a pathway for students to go on and study in the States, England or Australia … and having this one-on-one focus, goals and extra courses and strategising on which university to target and what courses will increase your chances of getting in.”

It was all sounding encouraging until Melissa received Crimson’s contract and found out the price. If she terminated the contract early, she wouldn’t be entitled to a refund or released of her obligation to pay the fees, except in very limited circumstances. And, all up, the two-year programme and 5 years of support would cost Melissa just over $72,000.

Melissa was surprised she’d have to keep paying even if she terminated Crimson’s contract. So were we. We think it’s unfair to lock a consumer into a contract like this. It would be like sending your child to a private school in year 9 and paying to keep them there until year 13, even though you’d pulled them out and sent them to a different school in year 10. We found a few other potentially unfair terms in this contract, too.

What’s an unfair contract term?

Unfair contract terms are prohibited in standard-form consumer contracts. Standard-form consumer contracts are essentially contracts that are the same for everyone and you can’t negotiate on an individual basis, for example, signing up with a gym or telecommunications or power company.

An unfair term:

• causes a significant imbalance between the rights of the company and those of the consumer
• is not reasonably necessary to protect the company’s interests
• causes some form of detriment to the consumer if applied.

Three potentially unfair terms in the Crimson contract

We found three clauses in the Crimson contract that we think are unfair.

1. Unfair termination clause

We think the most blatantly unfair clause is the one stating customers are generally not entitled to a refund and must continue paying for the service even if they are unhappy with it and wish to terminate the contract.

A spokesperson for Crimson said the clause does entitle the client to a refund and that terminations are handled on a case-by-case basis. Yet, the contract states that, if terminated, “the client will not be entitled to a refund or relieved of their obligation to pay the fees except where the provider has materially breached the agreement or where the Parties agree that special circumstances exist.”

We think Crimson’s termination clause needs to be amended to be made clearer and fairer.

Crimson also reserves the right to suspend the contract because of an act of God, but there’s no corresponding right for the consumer to stop paying in that situation.

While its spokesperson said the contract doesn’t state the client must continue to pay, equally, it doesn’t say the client is relieved of any obligation to keep paying, either. Again, we think this should be made clearer.

2. No warranty

Any goods and services a consumer buys come with specific guarantees under the Consumer Guarantees Act (CGA). No contract can override those rights. Yet, Crimson’s contract states that its service is provided “as is, without warranty of any kind, whether express, implied, statutory or otherwise”. As well as being unfair, we think this could be misleading and a potential breach of the Fair Trading Act.

A spokesperson for Crimson said local laws such as the CGA do apply and said the disclaimer only applies “to the maximum extent permitted by applicable law”. Crimson works across 20 jurisdictions, and it has one contract that’s used across them all. It said the terms should be “read in conjunction with […] the applicable local laws.”

We think this should be spelled out more clearly. A lay person reading the contract could easily think the CGA doesn’t apply when, in fact, it does.

3. Crimson can change the terms whenever it likes

Crimson also reserves the right to change the contract at any time. While it will give customers 30 days’ notice, if you don’t like the changes, your only option is to raise the change to the contract as a dispute. If the dispute isn’t resolved, you can terminate the contract, but if terminated, you will not be entitled to a refund or relieved of your obligation to pay the fees except in very limited circumstances. Again, we think this is unfair and likely to breach the Fair Trading Act.

Can you negotiate the terms?

A spokesperson for Crimson said, “prospective clients often negotiate certain terms and conditions prior to joining.”

We think the Crimson contract is a standard form consumer contract. However, if the terms are negotiated, it might no longer be a standard form consumer contract, and this means the unfair terms provisions of the Fair Trading Act won’t apply.

Only the court can decide whether a contract is a standard form contract. In making that decision, it will take into account:

• whether one of the parties had all or most of the bargaining power in the transaction
• whether the contract was prepared by one party before any discussion took place about the transaction
• whether a party was, in effect, required to accept or reject the terms of the contract in the form in which they were presented
• whether the parties had an opportunity to negotiate the terms of the contract
• the extent to which the contract considers the specific characteristics of the parties.

The onus is on the business to prove the contract isn’t a standard form contract.

We asked Crimson what percentage of people negotiated the terms of the contract last year. It estimated about 10% of clients in Aotearoa had “unique requests”.

Your right to complain about unfair terms

Generally, if you’re not given the opportunity to negotiate the terms of a consumer contract, there is very little you can do about an unfair term. Your only option is to complain about the term to the Commerce Commission. Unfortunately, only the Commission can challenge unfair contract terms in court.

Who has the Commission challenged for unfair terms?

• The last time the Commission challenged unfair contract terms was in 2024. That was against global ticketing firm Viagogo, and the case is currently before the Court of Appeal.
• Direct selling and marketing companies Ace Marketing Group and Home Direct have also faced charges.
• The online accommodation bookings company Bachcare was also issued with an unfair contract terms declaration in April 2024 and is due to have a day in court in November 2025.
• The Commission has historically reviewed contracts for gyms (2017), energy retailers (2016) and telecommunications companies (2016) but hasn’t been particularly active in this space lately.

The law clearly needs to change to allow consumers to challenge unfair terms themselves.

Our advice

We didn’t disclose Melissa’s identity to Crimson to protect her privacy. However, Crimson told us it believes Melissa did end up joining a Crimson programme for two years after negotiating the terms, rather than the initial five. To maintain her privacy, we can’t disclose whether she did or not.

We’d advise against signing the Crimson contract as it stands. Given we think the terms are one-sided and don’t clearly allow you to terminate the contract if things go pear-shaped, we’d steer clear.

If you come across an unfair term in a standard-form consumer contract, think twice about signing the contract and consider lodging a complaint with the Commerce Commission.

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*Name changed to protect privacy.