my fair liability



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On Tuesday 17 June a number of important changes to NZ’s consumer law regime will come into effect.  This blog discusses a change to the Fair Trading Act 1986(the FTA) that clarifies the extent to which B2B transactions can carve out liability under the FTA.

From Tuesday, when dealing with other businesses, you will be able to contract out of the FTA prohibitions on:

  • general misleading and deceptive conduct (section 9)
  • unsubstantiated representations (section 12A)
  • false or misleading representations (section 13)
  • false or misleading representations in connection with the sale or grant of land (section 14(1)).

To take advantage of this carve out, the following requirements must be met:

  • all parties must be in trade
  • all parties must agree to contract out of the relevant provisions of the FTA
  • the agreement must be in writing
  • it must be fair and reasonable for the contracting out to occur.

Until some court decisions are made, it’s difficult to say what is required to satisfy these requirements.  However, to give yourself the best possible protection until that time, we suggest you take a good look at the entire agreement clause of your agreements to ensure it is broad enough to obtain the benefit of the change (this is the clause that states that earlier agreements, discussions, etc. are superseded by the agreement).  As a minimum, we suggest this clause is expanded to include an express:

  • agreement to contract out of sections 9, 12A, 13 and 14(1) of the FTA
  • acknowledgement that each party has not relied upon (amongst other things) conduct and representations of the other party that are not expressly set out in the agreement.

We have thought about whether it would be useful to include an acknowledgement that the parties consider the contracting out to be fair and reasonable.  We’re still on the fence on this one but we think that the courts are unlikely to be swayed by a statement of this nature.  We’ll keep in touch if there is any development on this.

In the next week, we will update the relevant entire agreement clauses of our free legal templates to ensure clients and friends can obtain the benefit of the change.

Keep an eye on our blog for the next in our series on these consumer law regime changes.

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