For years, many New Zealand businesses have relied on standard form contracts as a practical necessity – efficient, scalable, and rarely challenged. That’s changing.
The Commerce Commission has signalled increased willingness to scrutinise unfair contract terms (UCTs), and recent enforcement activity shows that “set and forget” contract templates are now a real legal risk – particularly in B2B relationships involving smaller counterparties.
Under the Fair Trading Act, a term can be declared unfair if it creates a significant imbalance, is not reasonably necessary to protect legitimate interests, and would cause detriment if relied on. Once declared unfair, the term is unenforceable – and the reputational impact can be just as significant as the legal outcome.
Common risk areas include:
- Wide liability exclusions that leave one party with little or no recourse.
- Unilateral variation clauses allowing one party to change terms without agreement.
- Automatic renewal provisions that are difficult to exit.
- Disproportionate termination rights, particularly where only one party can walk away easily.
The key mistake businesses make is assuming that if a clause is “industry standard,” it’s legally safe. That’s not the test. The focus is on fairness in context.
So what should you be doing?
Start by reviewing your standard contracts through a risk lens, not just a commercial one. Ask: would this clause look one-sided to a regulator or a court? If challenged, can you justify why it’s necessary?
Next, consider how your contracts are actually used. A well drafted clause can still be vulnerable if presented on a take-it-or-leave-it basis to a smaller party with no real opportunity to negotiate.
Finally, treat this as more than a compliance exercise. Fairer contracts can strengthen relationships, reduce disputes, and position your business as one that’s commercially tough – but reasonable.
In the current environment, that balance matters. Because the real risk isn’t just having a clause struck out – it’s being seen as a business that relies on them.
Get in touch if you need guidance in reviewing your standard contracts. We are here to help.
