Misrepresentation In NZ: What To Do Before Signing

Mia runs a small hospitality group in Wellington. She's looking at signing a supply agreement for new coffee equipment, and the supplier says the machines will pay for themselves in 12 months because they can handle 300 coffees a day with almost no downtime.

It sounds promising, but something doesn't feel quite right. The numbers don't match what Mia has seen elsewhere, and the contract doesn't mention the 300 coffees, the payback period, or the downtime promise at all.

If you're in a similar spot, the best time to deal with possible misrepresentation is before you sign. Once the contract is signed, your options can become harder, slower and more expensive.

Here's how to record what you've been told, ask better questions, and build practical protections into your contract before your business commits.

What Counts As Misrepresentation In NZ?

Misrepresentation in NZ usually means a false statement of fact that persuades you to enter into a contract. The key point is that the statement influenced your decision to sign.

A misrepresentation might be made in a sales call, email, proposal, statement of work, pitch deck, franchise disclosure pack, product demo or meeting. It doesn't always have to appear in the final contract.

Common examples include statements about:

• expected revenue, profit or customer demand
• existing clients, contracts or pipeline
• product performance, compatibility or capacity
• stock levels, delivery timing or manufacturing capability
• licences, approvals, certifications or regulatory compliance
• the costs you should expect after signing
• exclusive territories, leads or referrals

Not every optimistic comment is a misrepresentation. A vague opinion like this product is the best in the market is less likely to be treated the same way as a specific factual claim like the system integrates with Xero and MYOB without custom development.

Promises about the future can be tricky. If someone says your business will make $20,000 a month, ask what facts that prediction is based on. If they have no reasonable basis for the claim, it may also raise misleading conduct issues under the Fair Trading Act 1986.

The practical test is simple: if you'd be unhappy signing without that statement being true, don't leave it sitting in a sales conversation. Get it written down and reflected in the contract.

How Does The Fair Trading Act Apply To Misleading Statements?

The Fair Trading Act 1986 can apply where someone in trade makes misleading or deceptive statements, even before a contract is signed. This matters because many pre-contract claims are also marketing or sales conduct.

Section 9 of the Fair Trading Act prohibits misleading or deceptive conduct in trade. Other parts of the Act deal with false or misleading representations about goods, services, prices, sponsorship, approvals, performance characteristics and benefits.

For example, a supplier might create Fair Trading Act risk if they tell you:

• software is already compliant with New Zealand privacy requirements when it isn't
• a product has a certification it doesn't actually hold
• a franchise territory is exclusive when another franchisee can sell there too
• a service is endorsed by a government body when it isn't
• a price includes all required onboarding when extra mandatory fees apply

The Commerce Commission enforces the Fair Trading Act. Depending on the issue, misleading conduct can lead to complaints, investigations, penalties, corrective advertising or private claims.

In business-to-business contracts, parties can sometimes contract out of certain Fair Trading Act provisions if the contracting out is in writing and is fair and reasonable. That doesn't mean every exclusion clause will work. It also doesn't mean you should accept a clause that says you didn't rely on anything you were clearly told.

If the contract is a standard form small trade contract, unfair contract term rules may also matter. In New Zealand, a small trade contract is generally a business-to-business standard form contract where the annual trading relationship is $250,000 or less when the relationship starts. One-sided clauses that shift all risk to you may deserve a closer look.

What Should You Record Before You Sign?

You should record every statement you're relying on before you sign, especially if it affects price, risk or your decision to go ahead. Don't rely on memory if the deal later turns on who said what.

Start by saving the source material. Keep a clean copy of:

• emails and attachments
• text messages and chat messages
• proposals, quotes and pitch decks
• advertising pages and brochures
• demo notes and screenshots
• meeting notes with dates and attendees
• financial models, forecasts and assumptions
• franchise disclosure materials and operating manuals, where relevant

Then create a short reliance note for your own file. This doesn't need to be formal. It just needs to be clear.

A Simple Reliance Note

1. Statement: Write the exact claim as closely as you can, including the words used.
2. Who Said It: Record the person's name, role and organisation.
3. When And Where: Note the date, meeting, call, email or demo.
4. Why It Matters: Explain how it affects your decision, pricing or risk.
5. Evidence: List the email, deck, screenshot or note that supports it.
6. Contract Treatment: Mark whether the statement is included in the contract, missing, or contradicted.

For example, Mia's reliance note might say: On 4 March, Alex from the supplier said the machine can produce 300 coffees per day with less than 2 hours downtime per month. We are relying on this to justify buying 3 machines at $18,000 each instead of leasing cheaper units.

This kind of record gives you a practical checklist for your contract review. It also makes it much easier to ask direct follow-up questions before you commit.

What Questions Should You Ask About Pre-Contract Statements?

You should ask direct, written questions that force the other party to confirm, qualify or correct the statements they've made. If a claim is important enough to rely on, it's important enough to verify.

Try to avoid broad questions like is everything accurate?. You'll usually get a broad answer back. Ask about the exact point that matters.

Useful questions include:

• Source: What information, report or data supports this statement?
• Assumptions: What assumptions were used to prepare this forecast or model?
• Limitations: Are there any conditions where this statement won't be true?
• Past Performance: Can you provide examples from comparable businesses or customers?
• Costs: Are there any extra fees, minimum spends, licence costs or third-party charges?
• Timing: What happens if delivery, onboarding or implementation is delayed?
• Authority: Do you have authority to make this commitment on behalf of the business?
• Contract: Where is this confirmed in the contract?

If the other party refuses to answer, changes the story, or says the contract won't include the statement, treat that as a warning sign. It doesn't always mean they're being dishonest. Sometimes the salesperson has overstated something, or the legal terms haven't caught up with the commercial deal.

Either way, the gap needs to be fixed before signing.

A helpful follow-up email can be as simple as: Thanks for today's call. To make sure we have this right before signing, please confirm that the system will process 10,000 customer records per month, integrate with our Shopify store without custom development, and be ready for use by 1 June.

If the answer comes back with conditions, put those conditions into your decision-making. A qualified answer is still useful because it shows you the real risk.

Which Contract Clauses Help Protect Your Business?

The best protection is to move the important pre-contract statements into the contract as clear obligations, warranties, conditions or schedules. If the contract says the opposite of what you were told, you may be signing away a practical argument.

Contracts often include clauses saying the written agreement is the whole deal, and that you haven't relied on any statements outside it. These are sometimes called entire agreement or no reliance clauses. They can be useful for certainty, but they can also create problems if key sales promises are left out.

Ask for clauses that match the real deal. Depending on the contract, that might include:

• Warranties: The other party promises that certain facts are true.
• Specifications: The goods or services must meet stated performance standards.
• Service Levels: Uptime, response times, delivery dates or support standards are measured.
• Conditions Precedent: You don't have to proceed unless a key event happens first.
• Disclosure Schedule: The other party lists exceptions, assumptions and known limitations.
• Termination Rights: You can exit if an important statement turns out to be wrong.
• Price Adjustments: Fees reduce or credits apply if performance falls short.
• Indemnities: The other party covers certain losses caused by specific incorrect statements.

A Clause Outline To Discuss With Your Adviser

1. Background Statements: List the key facts you relied on when deciding to sign.
2. Warranties: Turn critical statements into promises that they're accurate.
3. Performance Standards: Set measurable targets, not vague expectations.
4. Assumptions And Exclusions: Record any limits to the promises being made.
5. Evidence And Reporting: State how performance will be measured and reported.
6. Remedies: Include credits, correction rights, termination rights or other consequences.
7. Entire Agreement Carve-Out: Make sure the clause doesn't wipe out the specific statements you need protected.

This outline isn't a finished legal document or a substitute for tailored contract drafting. The wording should be tailored before you use it, because a clause that works for a software rollout may not work for a franchise agreement, equipment purchase, wholesale supply arrangement or terms of trade.

How Should You Review The Contract Before Signing?

You should review the contract by comparing it against what you were told, not just by reading it from top to bottom. This makes the review much more practical.

Here's a simple process you can follow.

Step 1: Build Your Deal Summary

Write a one-page summary of the commercial deal in plain English. Include price, term, deliverables, timing, support, exclusivity, assumptions, minimum commitments and the statements you're relying on.

Step 2: Match Each Promise To A Clause

Go through your deal summary and ask: where does the contract say this? If you can't find it, mark it as missing.

For example, if a franchisor told you the set-up cost is expected to be $95,000 plus GST, but the documents show training fees, fit-out approvals, compulsory suppliers and launch marketing are extra, you need to know whether the real number is closer to $120,000 or $150,000 before you sign.

Step 3: Check For Contradictions

Look for clauses that undo the sales conversation. These may include disclaimers, no reliance wording, limitation of liability clauses, broad variation rights, minimum purchase obligations, automatic renewals and restrictions on refunds or termination.

Step 4: Ask For Changes In Writing

Don't rely on a phone call where someone says, don't worry about that clause. Ask them to amend the contract, prepare a short contract amendment or confirm the agreed position in writing, then make sure the written contract matches.

Step 5: Get Tailored Help Where The Risk Is Material

If the contract involves a large spend, long term commitment, personal guarantee, franchise relationship, exclusive supply arrangement or important technology dependency, tailored advice can be worth getting before you sign. Templates and standard forms often miss the exact commercial risk your business is taking on.

What If You Have Already Signed?

If you've already signed, first preserve your records and avoid making the problem worse. Don't delete messages, overwrite notes, or send an emotional email that doesn't help your position.

Your next steps will depend on the contract, what was said, who said it, and how much you relied on it. Possible legal pathways may include misrepresentation under contract law, rights under the Contract and Commercial Law Act 2017, Fair Trading Act claims, or contractual remedies such as termination, credits or warranties.

Start with these practical steps:

1. Collect The Paper Trail: Save the signed contract, earlier drafts, emails, proposals, call notes, screenshots and invoices.
2. Create A Timeline: Set out what was said, when it was said, and when you signed.
3. Identify The Gap: Write down the difference between what you were told and what the contract or reality now shows.
4. Check Notice Requirements: Some contracts require notices to be sent in a specific way or within a certain time.
5. Pause Further Commitments: Be careful before ordering more stock, paying extra fees or making public commitments based on the same statement.
6. Get Advice Before Escalating: If you're considering cancelling, withholding payment or making allegations, get tailored advice first.

If the issue has turned into a dispute, you may need dispute resolution support from a provider that handles that type of work. The cleaner your records are, the easier it will be for the right adviser to assess your options.

Key Takeaways

• Misrepresentation in NZ can arise from false factual statements made before you sign, including statements in emails, pitch decks, demos and sales calls.
• The Fair Trading Act 1986 can apply to misleading conduct in trade, so marketing and sales claims matter as much as the final contract wording.
• Record every statement you're relying on, then ask written questions that confirm the source, assumptions, limits and contract treatment.
• Move key pre-contract statements into the contract as warranties, specifications, service levels, conditions or schedules.
• Watch for entire agreement, no reliance and exclusion clauses that could undermine what you were told.
• If you've already signed, preserve your records, build a timeline and get advice before escalating the issue.

If you'd like help with reviewing your contract before signing, turning key sales promises into protective clauses, or checking your supplier, franchise or customer agreements, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.