Gym Memberships: Cancelling Unfair Contracts in New Zealand
Understanding consumer rights in New Zealand is crucial when entering into service agreements such as gym memberships. The Consumer Guarantees Act 1993 (CGA) and the Fair Trading Act 1986 (FTA) provide legal protections for consumers regarding the quality of services and fairness of contract terms.
Consumer Guarantees Act 1993
The Consumer Guarantees Act 1993 provides guarantees that apply to services supplied to a consumer. A consumer is defined as a person who acquires goods or services of a kind ordinarily acquired for personal, domestic, or household use or consumption, and not for the purpose of resupplying them in trade, consuming them in the course of a process of production or manufacture, or repairing or treating in trade other goods or fixtures on land [Source: Consumer Guarantees Act 1993, s 2(1)]. A gym membership is considered a service under this Act.
Services supplied by a gym must comply with several guarantees:
- Guarantee as to Reasonable Care and Skill: Services must be carried out with reasonable care and skill [Source: Consumer Guarantees Act 1993, s 28]. This means the gym and its staff must provide their services to an acceptable standard. For example, ensuring equipment is maintained or instruction is competent.
- Guarantee as to Fitness for Particular Purpose: Services must be fit for any particular purpose that the consumer makes known to the supplier, either expressly or by implication, and for which the consumer relies on the supplier's skill or judgment [Source: Consumer Guarantees Act 1993, s 29]. For example, if a consumer joins a gym specifically to access a swimming pool, and the pool is consistently unavailable, the service may not be fit for purpose.
- Guarantee as to Time of Completion: If no time for completion of the service is fixed by the contract, it must be completed within a reasonable time [Source: Consumer Guarantees Act 1993, s 30].
- Guarantee as to Price: If the price for the service is not fixed by the contract, the consumer is not liable to pay more than a reasonable price [Source: Consumer Guarantees Act 1993, s 32].
Remedies under the CGA for Services
If a service fails to comply with a guarantee, the consumer may be entitled to a remedy. The nature of the remedy depends on whether the failure is a minor failure or a major failure.
A minor failure is one that can be remedied easily. In such cases, the consumer must give the supplier an opportunity to remedy the failure within a reasonable time [Source: Consumer Guarantees Act 1993, s 32]. If the supplier refuses or fails to remedy it, the consumer may have the service remedied by someone else and recover the reasonable costs from the supplier, or cancel the contract for the service [Source: Consumer Guarantees Act 1993, s 32].
A major failure is one that cannot be remedied or is of a substantial character [Source: Consumer Guarantees Act 1993, s 32A]. Examples include services that are unfit for their common purpose and cannot easily be made fit, or services that depart significantly from what was represented. For a major failure, the consumer may cancel the contract for the service or obtain damages for any reduction in value of the service below the price paid [Source: Consumer Guarantees Act 1993, s 32A].
It is important to note that a supplier cannot contract out of the CGA when supplying services to a consumer for personal, domestic, or household use [Source: Consumer Guarantees Act 1993, s 43].
Fair Trading Act 1986
The Fair Trading Act 1986 aims to protect consumers from misleading and deceptive conduct and unfair trading practices. It covers advertising, promotion, and the way businesses deal with consumers.
Key provisions relevant to gym memberships include:
- Misleading and Deceptive Conduct: No person in trade shall engage in conduct that is misleading or deceptive or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9]. This could apply to false claims about facilities, equipment, staff qualifications, or contract terms made during the sign-up process.
- Unsubstantiated Representations: A person in trade must not make a representation about a good or service if they do not have reasonable grounds for making the representation [Source: Fair Trading Act 1986, s 12A]. For example, promising specific fitness results without scientific backing.
- Unfair Contract Terms: The FTA provides protections against unfair contract terms in standard form consumer contracts. A standard form consumer contract is a contract that has been prepared by one party and presented to the other party on a “take it or leave it” basis, with little or no opportunity for negotiation [Source: Fair Trading Act 1986, s 46H]. An unfair contract term is a term that would cause a significant imbalance in the parties' rights and obligations arising under the contract, is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term, and would cause detriment (whether financial or otherwise) to a party if it were applied or relied on [Source: Fair Trading Act 1986, s 46I].
Examples of terms in gym memberships that might be considered unfair include:
- Excessive termination fees that far exceed the supplier's legitimate losses.
- Terms allowing the gym to unilaterally vary significant aspects of the service or contract without a corresponding right for the consumer to cancel.
- Automatic renewal clauses that do not provide clear and timely notice to the consumer, allowing them to opt-out.
- Terms that exclude the gym from liability for its own negligence or breaches of contract, where such exclusion is not permitted by law.
If a term in a standard form consumer contract is declared unfair by a court, it is unenforceable [Source: Fair Trading Act 1986, s 46J]. The remainder of the contract continues to bind the parties to the extent it is capable of operating without the unfair term [Source: Fair Trading Act 1986, s 46J]. The Commerce Commission can apply to a court for a declaration that a term is unfair [Source: Fair Trading Act 1986, s 46K].
General Contract Law Principles
While the CGA and FTA provide specific protections, general contract law principles also apply. Contracts are generally binding agreements. Therefore, it is important for consumers to read and understand the terms and conditions of a gym membership contract before signing. This includes understanding the duration of the membership, cancellation policies, and any fees associated with early termination or suspension.
When to Seek Independent Legal Advice
Individuals facing issues with gym memberships, particularly concerning alleged breaches of consumer guarantees, misleading conduct, or unfair contract terms, should consider seeking independent legal advice. Information regarding consumer rights and potential actions can be obtained from official bodies like the Commerce Commission or by contacting Community Law Centres for free legal assistance.