AROPA Question 2
Discuss whether the unfair contract terms regime in the Fair Trading Act 1986 should be amended
so as to allow consumers to challenge unfair contract terms directly in the courts (rather than
through the Commerce Commission).
Word Limit: 500-800 words
The purpose of the unfair contract terms law is to protect consumers by regulating businesses to
provide contracts with fair terms. Without such regulations, businesses would gain advantages by
amending the terms of contracts in their favor (e.g. amend terms without notice or impose significant
penalties, etc.). While the new law aims to provide extra protections for consumers, it is likely that
the unfair terms will continue to exist due to some limitations of the new law.
The unfair contract terms provision allows the commerce commission to seek declaration from
district court or high court. However, there are few differences that stand out when compared to the
similar law in Australia. Firstly, the act only gives the right to the commerce commission to seek
declaration from the courts. This means that consumers are unable to challenge the unfair
terms by themselves. If consumers believe they have entered into an agreement with unfair terms,
they can only go through to the commerce commission to challenge the terms. This would raise a
question as to whether the commerce commission has the resources and capacity to review and
investigate every single application. Even if it is capable to process all complaints from
consumers, it has no duty to apply to the court for declaration. Such arrangement would add
complexity and difficulty for consumers to seek protection from the unfair terms, which ironically,
is one of the main purposes of the act.
