Standard Form Contracts: Everything You Need to Know
Standard form contracts are intended to make common agreements between suppliers and consumers more efficient and less costly. 3 min read
2. Issues With Standard Form Contracts
3. Rights Against Standard Form Contracts
Updated October 29, 2020:
Standard form contracts are intended to make common agreements between suppliers and consumers more efficient and less costly. You can find some of these forms (for example, lease agreements, construction contracts, and divorce papers) either at your local office supply store or online. Make sure you understand the following facts about standard form contracts:
- They are meant to help both the supplier and consumer.
- They can give suppliers or vendors an unfair advantage.
- They are subject to regulations as a way to provide some protection to the consumer.
What Are Standard Form Contracts?
Non-negotiated pre-written agreements are called standard form contracts. Other names for these agreements include the following:
- Boilerplate contracts
- Contracts of adhesion
- "Take it or leave it" contracts
The party with the most bargaining power controls the terms of the agreement. These terms are usually non-negotiable by the customer or end-user.
The goal is to use standard contracts for anyone conducting similar business transactions.
They are critical to high volume distribution of many goods and services. Standard forms are very common. Some examples include rental property, employment, utility, and cell phone service agreements. These contracts can reduce the cost to do business since you don't have the cost involved in negotiating contract details. Still, consumers are at a disadvantage with these contracts since there is an inequity in the bargaining power.
This is because these contracts are usually written by corporate lawyers without the customer or the business being involved. This situation carries a high potential of giving the vendor an unfair advantage because it highlights the attractive portions of the contract and hides the "gotchas" in the fine print. The unfair contract terms law (UCTL) was enacted on March 17, 2015. It gives the consumer a way to complain to the District Court about seemingly unfair contract terms.
Issues With Standard Form Contracts
Standard forms are popular because they are used to facilitate common business transactions in an efficient cost-effective manner. These contracts are usually many pages long with details outlining the terms and conditions. Standard contracts are frequently used in situations where vendors and consumers routinely participate in legally and technically complex transactions. While there are many benefits to standard forms, there are issues and risks with them as well.
One of these issues includes the "battle of forms" when both parties use their own form for the transaction. Furthermore, these contracts are so detailed and long, consumers often sign the agreement without reading the fine prints.
Also, the terms in standard form contracts often benefit the party with the most bargaining power. This type of uneven purchasing power exists between businesses and consumers. When there are inequities in the ability to negotiate, it results in an agreement that works economically against the consumer. In these cases, the courts advocate for the consumer. If the contract does not genuinely lookout for the best interests of all parties, the courts will intervene.
Rights Against Standard Form Contracts
You usually can't negotiate terms in a standard contract. That is why New Zealand enacted the Fair Trading Act. This law is applicable to standard agreements for goods or services in New Zealand.
Under the Fair Trading Act, the courts determine whether the contract in dispute is a standard form contract. An example of a penalty clause in a contract is if a stipulation makes it impossible to uphold your part of the agreement.
The Fair Trading Act considers an unfair contract term (UCT) any clause that does the following:
- Causes you to have an unwarranted lack of protection or an excessive amount of duties
- Overprotects the vendor's interest
- Would be to your financial detriment it was enforced
Here are some examples of terms that do not fall under UCT law:
- Any term that describes or defines the service or product under contract
- Clauses that deal with the pricing and fees unless it is penalty fees
- Any other law or ordinance that is allowed by another governing or regulatory body
While standard contract forms are advantageous, there are risks to entering into an agreement where the supplier has the upper hand. Make sure you get help in understanding all the fine print and your rights as a consumer.
If you need help with standard form contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.