Knock, knock. Who’s there? The Commerce Commission

Aisling Weir and Sonya Hill

“Standard form consumer contracts.” Those terms might be unfamiliar but you will definitely have signed these types of contracts before. They are essentially the “take it or leave it” contracts that we sign when we join the gym or rent a car, or set up an electricity or broadband account. Usually they are pro-forma contracts and most of us don’t even read them; we simply sign on the dotted line.  After all, it’s not like the terms can actually be negotiated.

Until recently, there were very few restrictions on what could go into “take it or leave it” contracts but all that changed in 2015 when the Commerce Commission (who we like to call ComCom) was given the job of ensuring that consumers are protected from unfair terms in standard form consumer contracts.

Why should aged care providers care about this? The contracts used to admit residents into aged care facilities (admission agreements) often fall into the category of “standard form consumer contracts” – they are usually pro-forma agreements that potential residents are expected to accept or reject wholesale and there is very little scope for meaningful negotiation (putting aside the resident’s right to opt in or out of certain services and add-ons).

There is nothing wrong with using admission agreements in that way (it would be unworkable for providers to negotiate every new admission agreement) but aged care providers need to make sure that the terms in their admission agreements are not unfair. Why? Because if ComCom thinks that a term is unfair (and we’ll come back to what that means soon), then it can ask the Court to declare that the term is unfair. If the Court agrees with ComCom, then the term will be unenforceable.

What does “unfair” mean? The definition is somewhat complicated because there is a range of intersecting factors that the Court has to consider in deciding whether a term is unfair. Helpfully, though, the unfair contract terms legislation gives examples of terms that the Court may find unfair. These include terms that allow one party (but not the other party) to unilaterally vary the contract, terminate the contract, renew or not renew the contract or decide if the contract has been breached, plus a number of other terms.

Hang on, hang on. If the law came into effect in 2015, then why are you telling us this now? Because ComCom may come knocking sometime soon and ask to look at your admission agreements. ComCom has publicly said that it will review the standard form consumer contracts used in specific industries including retirement villages, and it has told us that it may also look at admission agreements used by aged care providers.  If ComCom does decide to do that, then it will probably start its review in the next month or so.

And here is the kicker. ComCom is not afraid to name and shame – it is publishing reports that include the names of the providers whose contracts were reviewed and whether those contracts contain unfair terms.

Long story short: Make sure that your admission agreement does not contain terms that could be held “unfair” before ComCom comes a knocking…

If you would like to talk about anything covered in this article in more detail, please contact us. For further information about what we do for aged care providers please click here.

Aisling Weir, Consultant
DDI Auckland: 09 551 0459

Sonya Hill, Consultant
DDI Christchurch: 03 372 1090

This article is intended to provide a summary of the subject covered only and is necessarily general and brief. It is not intended as legal advice and nothing in the article should be relied upon without getting specific professional advice.