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Report No. 199

New Zealand: (substantive unfairness)

New Zealand Law Commission, 1990 in the Report on 'unfair' contracts (Nu11) proposed a definition as follows:

"(1) A term of a contract is also unfair if, in the context of the contract as a whole, it is oppressive;

(2) A term of a contract is oppressive if it:

(a) imposes a burdensome obligation or liability which is not reasonably necessary to protect the interests of the other party; and

(b) is contrary to commonly accepted standards of fair dealing.

(3) A transaction that consists of two or more contracts is to be treated as a single contract if it is in substance and effect a single transaction."

The Commission gave a number of examples of 'substantive' unfairness.

It also stated that a contract is not unfair unless, in the context of the contract as a whole,

(a) it results in a substantially unequal exchange of values; or

(b) the benefits received by a disadvantaged party are manifestly inappropriate to his or her circumstances; or

(c) the disadvantaged party was in a fiduciary relationship with the other party.

The above are the 'substantive' unfair terms in contract or guidelines relating thereto, which are found in other countries.

Unfair (Procedural and Substantive) Terms in Contract Back

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