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18 March 2015

Opinion: Help us get rid of unfair contracts

Campaign will out companies with unfair contracts.

Be honest – how many times have you read the small print in the contract when you’ve signed up for a rental car, switched your electricity company, joined a gym or changed your telco plan? Probably not often and usually only when something has gone wrong.

If you had decided to work your way through the terms and conditions of these standard-form contracts you would have got a rude awakening. Many contain terms which unfairly favour the company to your detriment. That is until now. From this month unfair terms are banned in standard-form contracts.

Common culprits include terms that give a company unilateral rights to vary the contract, the goods or services supplied, or even the price. Recently we came across a term in an Accor Vacation Club contract that provided the consumer had to pay an annual membership fee until 2080. During that time the company could vary any of the entitlements; death provided no respite. Accor could pursue the estate for outstanding fees.

Gym membership contracts are another kind of standard form contract that can give owners wide-ranging rights. One example is that the contract might contain a condition which allows the gym to change location. The contract will say you have to keep paying fees regardless, even if you can no longer access the facilities.

Companies have been given a generous amount of time to remove unfair contract terms but we haven’t seen much evidence that it’s happened. So this month we’re launching our “Play Fair” campaign to out companies continuing to use unfair contract terms.

Australia introduced a similar ban in 2010. Its equivalent of our Commerce Commission last year investigated daily deal site LivingSocial, forcing the company to axe clauses in its contract giving it the right to make substantive changes without telling its customers. It’s also taking action against Chrisco Hampers and Europcar.

It will be up to the commission here to take action against offending companies with fines up to $600,000. Anyone can ask the commission to seek a declaration from the courts that a term is unfair. However, we’re concerned this will mean companies might get away with unfair contracts because the commission won’t be able to act on all complaints. It would be easier if the law was amended so individuals could challenge terms in the Disputes Tribunal.

If you think you’ve found an unfair term in a standard-form contract, we’d like to hear from you.

About the author:

Sue Chetwin has been our Chief Executive since April 2007 after more than 25 years in print journalism. She was formerly the Editor of Sunday News, Sunday Star Times and the Herald on Sunday. She says there are strong parallels between consumer advocacy and journalism.

Sue oversees all of Consumer’s operations and is also the public face of the organisation. Sue is a director of the Banking Ombudsman Scheme, an alternate on the Electricity and Gas Complaints Commission and a member of the Electricity Authority Retail Advisory group.

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