Before you agree to or sign a contract
Before you sign a written contract, take time to understand what you are agreeing to. Read all the terms of the contract, including the fine print. You can minimise your risk in various ways:
- Ask questions and get advice if there is anything you are unsure about or don’t understand.
- Negotiate or shop around if the contract doesn’t suit your needs.
- Ask the seller to explain the contract, verbal promises or claims to be attached in writing to the contract.
- Don’t be pressured into signing anything on the spot.
- Never sign a blank contract or allow details to be filled out later by a salesperson.
- Check that any figures or other information inserted into the contract are correct.
- Get a copy of any contract you sign.
Know your rights
You have various rights if there is a problem with any products or services:
- statutory rights under consumer laws such as the Consumer Guarantees Act, the Fair Trading Act, and the Credit Contracts and Consumer Finance Act 2003
- contractual rights under your contract with the trader or seller
- common law rules of contract made by the courts.
Consumers with disabilities may be more at risk of not knowing their rights, if these have not been fully explained to them before signing a contract.
Most consumer contracts do not have to be in writing to be legally binding. However, some consumer contracts must be in writing:
- consumer credit contracts
- door-to-door and layby sales contracts
- extended warranty contracts.
Electronic contracts have some special rules about formation, but are otherwise legally binding contracts. Read E-signatures and electronic contracts to find out more.
Generally only the parties to the contract have any contractual rights under the contract.
A breach of contract is where one of the parties to the contract breaks or does not complete the terms or conditions of the contract.
You may be entitled to compensation if you have suffered financial loss as a result of a breach. Or you may be able to cancel the contract and get a full refund. Some contracts allow for cancellation, and some Acts provide special rules about cancellation for certain contracts such as layby sales.
When a contract is legally enforceable
A contract will be legally enforceable if these conditions are met:
- you both intended to make the contract and agree about what is in the contract
- the contract is legal: otherwise it is not enforceable under the Contract and Commercial Law Act
- you are legally capable, also called ‘capacity’. People who are legally not capable of making contracts are:
- minors – people aged under the age of 18 unless they’re married, or unless the other party to the contract can show the contract is fair and reasonable
- people of unsound mind, including intoxicated people
- people with property or personal orders under the Protection of Personal and Property Rights Act 1988 – find out more on the Ministry of Justice website(external link)
- there was no duress, undue influence or unconscionable conduct.
Duress: If serious threats or pressure are used to force someone to accept a contract, it may not be enforceable.
Undue influence: If someone gets an unfair or improper advantage by abusing their power over another more vulnerable party, eg that person is young and impressionable, elderly, has some form of physical or mental incapacity, or is in a close relationship of confidence and trust.
Unconscionable bargains: If someone has a special disadvantage (such as sickness, age, physical or mental incapacity, illiteracy, intoxication), which the other party knowingly exploits, the court can cancel the contract.
The legal test of what is fair and reasonable for minors includes:
- the circumstances of how the contract was made
- the type of contract it is, eg a loan contract versus buying clothes
- the nature and value of the property, eg an expensive car versus a toaster
- the age and means (if any) of the minor
- all other relevant circumstances.
Parents are not liable for their children’s contracts or debts unless they agreed in writing to act as a guarantor.