What you should know about the terms and conditions of contracts, which set out the rights and responsibilities of each party, and paying a deposit.

Make sure you read and understand the fine print

These are the rules of a contract – the important information about the deal you are entering into and your rights as a consumer. They set out what you and the seller must do to complete the contract. Once you enter into a contract, you have accepted the terms and conditions. Make sure you read and understand these. If you are unsure, seek legal help before you sign.


Paying a deposit

A deposit is a form of security that the contract to buy will go ahead. After the contract is completed, you will pay the balance – the rest of the money.

It is for you and the trader to agree on whether a deposit is to be paid, how much the deposit will be, and in what circumstances the deposit will be refunded. If the trader does require a deposit:

  • ask whether the deposit will be refundable and make this a term of the contract
  • only pay a deposit of 10% or less, unless you have ordered purpose-built products such as kitchen joinery, when a larger deposit may be reasonable
  • get a receipt showing the amount paid, the balance owing, and whether the deposit is refundable.
  • Getting a quote or estimate before work starts: It’s vital to get a quote or estimate before you get work done such as house renovations or repairs. You should shop around by getting a range of quotes from different tradespeople.

See also:


Unfair clauses in standard form contracts

While you may have the opportunity to negotiate before you agree, it is common to be offered the same or a similar contract as everyone else. This is known as a standard form contract. Examples include car-parking, childcare centres, events, gym membership, finance, retirement villages, and much more. There are laws to protect you from unfair contract terms in standard form consumer contracts entered into after 17 March 2015, and in existing contracts that are varied after that date.

Read Standard form contracts, including unfair contract terms.

Types of terms and conditions

Contract terms and conditions include express terms, implied terms, conditions, exclusions and penalty clauses.

Some types of contracts have implied terms that apply even if they are not included in the contract.

Express terms

Are terms that are clearly stated and agreed when the contract is made. Express terms may be agreed verbally, written into the contract, or stated on a receipt or a notice at the counter.

Contracts commonly have express terms about:

  • who the contract is between
  • what is to be sold or supplied (products/ services)
  • what the price is and the terms of payment
  • when a job is to be started or completed
  • when products are to be delivered.

Implied terms

These are terms that are not specifically stated but which are still part of the contract.
Implied terms are most commonly implied by statute – ie that kind of contract is covered by a particular Act. For example, contracts for the sale of goods have an implied term which guarantees that goods will be of acceptable quality (under the Consumer Guarantees Act). The consumer contract does not have to specifically mention the Consumer Guarantees Act.

Conditions

Conditional contracts require certain conditions (or actions) to be met by one or both of the parties to the contract. Otherwise the contract does not go ahead – it becomes ‘void’. Both parties must agree to the conditions at the time the contract is made.

Exclusion clauses

These remove some of the trader’s responsibilities if the contract is broken, eg:‘The manufacturer is not responsible for a fault if the goods are used in a way that is not intended.’ 

Exclusion clauses are not always clear, so always ask the trader what happens if something goes wrong with the goods when they haven’t been misused.

Penalty clauses

Any term of the contract that specifies an excessive amount to be paid by you for breach of contract, which is out of proportion to the loss that the supplier would suffer. Penalty clauses may not be valid or enforceable under contract law.


Understanding common terms and conditions

Common terms, conditions and clauses in a contract or agreement include:

Parties

Sets out who the contract or agreement is between. This usually means clearly identifying the seller, eg business, trader, retailer or service provider, and the consumer, eg buyer, customer or client.

Term

How long the contract or agreement will last.

Entire agreement clause

Makes it clear there are no other terms apart from what’s written in the contract or agreement. If a problem occurs, the written contract or agreement alone will set out the rights and obligations of both you and the seller.

Representation

A seller’s promise that the product or service is what they claim it to be.

Warranties

The promises a seller makes to you when you buy a product or service. Usually, warranties will include your rights as a consumer if something goes wrong. Some warranties, such as extended warranties, may provide promises over and above the law, eg the ability to return an item you accidentally damaged.

Implied warranties

Your warranties may not be fully written out in the terms of your contract or agreement. If the terms state you have “implied warranties”, this includes all of your rights under laws, eg the Consumer Guarantees Act.

Indemnities

Spells out the protections that both you and the seller have when you enter a contract or agreement. Typically, the purpose of an indemnity clause is to limit a seller’s responsibility for any loss or damage that may occur.

Remember, no matter what the indemnity clause says, you still have rights under consumer laws if something goes wrong.

Force Majeure

States the situations when the seller can be excused from their obligations in a contract or agreement for reasons outside of their control, eg earthquakes and other natural disasters.

Breach and termination

Spells out when you or the seller can end the contract or agreement. Typically, you or the seller can end the contract or agreement if the other party doesn’t follow the terms of the agreement. Contracts or agreements may end for other reasons, eg force majeure.

Look out for any cancellation fees you might have to pay if you end a contract or agreement early.

Jurisdiction

Typically outlines which country’s laws apply to the contract or agreement. It may also include information on which country, or court within that country, will deal with any legal action or proceedings if there’s a dispute between you and the seller.

Make sure you read the seller’s privacy policies, particularly if you buy online from an overseas retailer.

Different countries have different laws about how a seller can use your personal information.

Assignment

Outlines when a seller or business can transfer your contract or agreement — or your particular rights under them — to another seller. For example, if your internet provider is bought out by another business, your contract can be transferred to the new business.

Variation

Sets out the situations when you or the seller have the power to change terms of the agreement, eg the amount or frequency of payments.

If things go wrong

Contact the supplier

Go back to the supplier as soon as you discover a problem. Explain what the problem is and how you would like it to be resolved. You should take along proof of purchase, such as your receipt or bank statement or the contract for services.

If the problem is minor, the business can choose to repair, replace or refund your money. If the business fails to act or is unable to fix the minor fault or the fault is serious, you may then reject the products or services and ask for a full refund. You need to give your reasons for doing so, preferably in writing. You may refuse to pay any invoice for services if you have not already paid.

See also:


Next steps

If you are unable to resolve your issue directly with the retailer, manufacturer or service provider, our Resolve It tool has information to help you take the next steps. These may include going to the Disputes Tribunal or District Court.

Resolve it: Contracts


Need more help?

Contact us for more guidance.

Common situations

Express terms

Jane goes to a timber yard to order fenceposts. A sign clearly displayed at the counter says ‘Payment within 14 days of delivery’. It is an express term of the contract that Jane will pay for the timber within 14 days of delivery.

Moana orders three cords of firewood from Joe. Joe agrees to deliver the firewood on Friday afternoon (an express clause). Moana agrees to pay on delivery (another express clause).

Implied terms

Contracts for consumer products (ordinarily used for personal, domestic or household use) will have an implied term that guarantees the products will be of acceptable quality.

Conditions

House buyers often agree to purchase a property on condition that they have a stated number of working days to arrange suitable finance. If they can’t get finance, the sale will be cancelled and any deposit already paid will be refunded in full.

Car buyers often agree to buy a car on condition that the car passes a mechanical check. If the car fails to pass, the buyer can choose to cancel the contract and get any deposit already paid back in full.

Exclusion clause

An example of an exclusion clause is a statement that ‘The manufacturer is not responsible for a fault if the goods are used in a way that is not intended.’