Unfair Contract Terms: A New Dawn in Australia and New Zealand?

Australia finally regulated unfair contract terms under its Australian Consumer Law and New Zealand has included unfair contract terms in its Fair Trading Amendment Act 2013 (NZ), which will come into force on 18 March 2015. Traders will in effect bear the burden of proving that terms are fair by showing that they are reasonably necessary to protect the trader’s legitimate interests. While the regulation of unfair contract terms is welcome, there is concern that the Australian and New Zealand courts may not give proper effect to the provisions and so would allow unfair contract terms to continue to be used. The courts must accept that the classical theory of contract law, in relation to consumers, is dead, and so too is the rational consumer. This paper argues that for the unfair contract term law to achieve the legislatures’ desired outcome of eliminating unfair contract terms in standard form consumer contracts, the courts in both New Zealand and Australia must move from their traditional focus on procedural fairness to addressing substantive fairness and give effect to both the wording and purpose of the provisions. Moreover, there are legislative lapses in both Australia and New Zealand that require urgent attention.