We have all experienced being asked to sign supplier contracts and terms of trade, not just in business but in many aspects of your private life as well.
Often, the forms are presented to you with a “please sign here” and you are aware that there are numerous clauses in fine print often unable to be read without assistance (especially for those with less than adequate eyesight) let alone understood by the average person.
The law does provide protection for unwitting customers in respect to unfair contracts, particularly for the inexperienced or lay person.
However in the case of business to business dealings, the use of Terms of Trade included in credit applications or supply contracts are now the norm rather than the exception.
These forms contain a number of obligations and generally from the supplier’s point of view, exclusions of liability.
The general rule of law is that the courts will interpret those exclusion clauses against the person trying to enforce them.
A recent case in the High Court however has shown that a careless or indifferent approach to signing these forms can backfire.
In this case, the director of a company being asked to sign a credit application form did so. The form contained a declaration which included an acknowledgement by the customer (director) that the supplier’s standard terms form part of the agreement. It should be noted that the director did not actually sign the signature section on the back of the form in respect to those terms only the declaration on the front page.
A dispute arose between the customer and supplier and the supplier sought to rely on the exclusions of liability clause in the standard terms.
The court held the action of the customer signing the declaration with the acknowledgment waived the need for a specific notice requirement of the exclusion clauses in the fine print.
The court held that while exclusion clauses, which limit the other parties right to sue for damages require clear language, specific execution or notice of the exclusion clause was not required where commercial parties were capable of looking after their own interests.
The message to be taken from this decision is be careful when you are signing standard form contracts. Make sure you understand what is being signed and if you are not happy with the terms, either delete or renegotiate.
We regularly advise on commercial terms for clients and prepare terms of trade for our commercial clients. We are able to advise on all aspects of commercial contracts and terms of trade.
If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:
Paul Farry
pfarry@farry.co.nz
09 379 0055 or 03 477 8870
The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.