When Can You Change Prices In A Customer Contract?

Rising supplier costs, wage increases, freight delays and software fees can all squeeze your margins. If your customers are already locked into contracts, though, lifting your prices can feel awkward.

The good news is that you can often change prices in an ongoing customer contract, but you need to do it in the right way. The answer usually comes down to what your contract says, how much notice you give, and whether your customer has a genuine choice to accept the new price or walk away.

A well-drafted price variation clause in your customer contract can give your business flexibility without surprising customers or creating compliance issues under the Fair Trading Act 1986 and Consumer Guarantees Act 1993.

Can You Change Prices In A Customer Contract In New Zealand?

Yes, you can change prices if your contract allows it or your customer agrees to the change. If neither of those things applies, you generally can't just charge more for the same goods or services.

Think of your customer contract as the deal both sides signed up to. If it says you'll provide a monthly service for $500 plus GST for 12 months, that price is part of the bargain. Changing it halfway through usually needs a clear contractual right or a fresh agreement.

The position is different for new orders, renewals or month-to-month arrangements. If your contract lets either party end the arrangement on notice, you may be able to give notice that your current pricing will end and a new price will apply after a certain date.

For example, say Hana runs a Wellington-based bookkeeping service. Her client agreement says her monthly package is $750 plus GST and either party can terminate with 30 days' notice. If her costs increase, she may be able to tell existing clients that the price will increase to $850 plus GST from the next billing period after 30 days. If a client doesn't want to continue, they can end the agreement before the new price applies.

That's very different from saying, halfway through a fixed 12-month contract with no price change clause, that last month's invoice was $750 but this month's will be $850. Without a contractual right or customer agreement, you may struggle to enforce the higher amount.

What Is A Price Variation Clause?

A price variation clause is a contract term that explains when and how your business can change its prices during the contract. It's often used in ongoing customer agreements, subscription terms, service agreements, supplier agreements and terms of trade.

A good clause does more than say, "we can change prices at any time". That kind of wording may look flexible, but it can create legal and customer relationship problems if it's too one-sided.

A stronger price variation clause usually covers:

• When prices can change, such as on renewal, annually, after a notice period, or when particular costs increase.
• How much notice you'll give before the new price applies.
• How you'll notify customers, such as by email, account notice or written notice under the contract.
• Whether the customer can cancel before the increase takes effect.
• Whether the increase applies to existing orders or only future orders, renewals or billing periods.
• How GST is handled, especially if your advertised prices are GST-inclusive for consumers.

For a business with recurring revenue, this clause can be one of the most useful terms in the whole contract. It helps you keep up with costs while giving customers a clear process.

Do You Need Customer Acceptance Before A Price Increase?

Sometimes yes, and sometimes no. If your contract already gives you a valid right to increase prices after notice, your customer may have accepted that process when they agreed to the contract.

That doesn't mean you can ignore fairness, notice or consumer law. It simply means you may not need a new signature every time prices move.

When Acceptance Is Usually Built Into The Contract

Your customer may have already accepted future price changes if your contract clearly says:

• you can change fees at certain times, such as after 30 days' notice;
• the change will apply from a future date, not retrospectively;
• the customer can cancel before the new price applies; and
• the customer agreed to those terms before buying or signing up.

This is common in subscription terms. For example, your terms might say that you can change monthly subscription fees by giving at least 30 days' written notice, and the customer can cancel before the change takes effect.

If the customer keeps using the service after the notice period, that continued use may be treated as acceptance of the new price, if the contract clearly says so.

When You Should Get Clear Agreement

You should get clearer acceptance where the price change is outside the contract, unusual, significant or likely to surprise the customer.

That might mean:

• asking the customer to sign a variation letter;
• getting written confirmation by email or a short contract variation;
• using a click-to-accept process for online subscriptions;
• issuing updated order terms for future purchases; or
• having the customer agree to a renewal quote before work continues.

Templates often miss these practical acceptance steps. Your clause might say you can change prices, but if your checkout flow, proposal process or invoice wording tells a different story, the paperwork may not protect you as well as you think.

How Much Notice Should You Give Customers Before A Price Increase?

You should give the notice period required by your contract, and if the contract is silent, you should give reasonable notice before the increase applies. There's no single notice period that fits every customer contract in New Zealand.

What is reasonable depends on the arrangement. An IT services agreement or monthly software subscription might use 30 days' notice. A long-term supply agreement might need a longer period, especially if the customer needs time to change suppliers, update budgets or tell its own customers.

As a practical guide, many businesses use:

• 14 days' notice for low-value, flexible, month-to-month services where customers can easily cancel;
• 30 days' notice for most subscription services, retainers and ongoing service agreements;
• 60 to 90 days' notice for larger B2B arrangements, annual contracts or services that are harder to replace; and
• renewal notice only where the price is fixed for the current term and can only change at renewal.

These aren't fixed legal deadlines. Your contract, your industry and your customer's position all matter.

Your notice should be clear and easy to understand. It should say:

• the current price;
• the new price;
• the date the new price starts;
• why the price is changing, if that will help maintain trust;
• what the customer needs to do, if anything; and
• whether the customer can cancel before the new price applies.

Try not to hide a price rise in fine print or a general newsletter. If a customer later says they never knew about the increase, you want to be able to point to a direct, clear notice.

Can A Contract Price Increase Clause Be Unfair?

Yes, a contract price increase clause can be unfair if it gives your business broad power to change prices without clear limits, notice or a reasonable exit right. This is especially relevant if you use standard form terms with consumers or small business customers.

Under the Fair Trading Act 1986, unfair contract term rules apply to standard form consumer contracts and standard form small trade contracts. A small trade contract is generally a B2B contract where the parties are in trade and the annual value of the trading relationship is $250,000 or less, including GST, when the relationship first arises.

A term may be unfair if it:

• would cause a significant imbalance between your rights and the customer's rights;
• isn't reasonably necessary to protect your legitimate business interests; and
• would cause detriment to the customer if you relied on it.

The Commerce Commission can take action in relation to unfair contract terms. If a court declares a term unfair, you can't use, apply or rely on that term.

Price variation clauses aren't automatically unfair. Your business may have perfectly legitimate reasons to change prices, especially where input costs or service costs change. The risk usually comes from how the clause is drafted and used.

Higher Risk Wording

A clause is more likely to raise concerns if it says your business can:

• increase prices at any time for any reason;
• change fees without telling the customer first;
• apply increases to work already completed or orders already accepted;
• keep the customer locked in after the increase; or
• change the price while preventing the customer from ending the contract.

That kind of clause can feel efficient when you're drafting it, but it may create more risk than protection.

Lower Risk Wording

A clause is generally safer when it:

• sets out when price changes can happen;
• requires advance notice;
• doesn't apply increases retrospectively;
• gives customers a fair chance to cancel before the increase starts;
• explains any formula, indexation or cost-based trigger; and
• is written in clear, plain language.

Fairness isn't just a legal issue. If your customer can see the process upfront, they're less likely to feel blindsided when the increase arrives.

What Consumer Law Issues Should You Watch For?

You need to make sure your pricing and notices aren't misleading, and that you don't try to contract out of consumer guarantees where you aren't allowed to. The Fair Trading Act 1986 and Consumer Guarantees Act 1993 are the key laws to keep in mind.

Under the Fair Trading Act, your business must not engage in misleading or deceptive conduct. For price increases, this means your advertising, quotes, checkout pages, renewal emails and invoices should all line up.

Watch out for statements like:

• "fixed price" when the contract allows you to change the price;
• "price locked for life" when you only mean the first term;
• "no hidden fees" if extra charges can be added later;
• "cancel anytime" if cancellation only works at the end of a billing cycle; or
• "from $49 per month" without making key limits or later increases clear.

If you sell to consumers, the Consumer Guarantees Act gives customers non-excludable rights around acceptable quality, fitness for purpose, reasonable care and skill, and reasonable time. You can't avoid those guarantees by writing a broad price change clause.

If you sell to other businesses under a goods and services agreement, you may be able to contract out of parts of the Consumer Guarantees Act, but only if the goods or services are acquired in trade, the contracting out is in writing, and it's fair and reasonable. That needs careful drafting.

You should also think about GST. If you sell to consumers, prices are usually expected to be GST-inclusive unless clearly stated otherwise. If you sell to businesses, you might quote prices as plus GST, but your contract and invoices should be consistent.

How Should You Draft Subscription Price Change Terms?

You should draft subscription price change terms so customers know when fees can change, how they will be told, and what they can do before the new price starts. This is especially important for SaaS, memberships, online courses, digital platforms and other recurring billing models.

Subscription customers often sign up quickly online. That makes your sign-up process just as important as the wording itself. If your customer wasn't shown the terms properly before payment, it may be harder to rely on them later.

What To Include In Subscription Terms

Your subscription price clause should usually cover:

• Billing cycle, such as monthly, annual or usage-based billing.
• Renewal process, including whether the subscription renews automatically.
• Notice of price changes, including how much notice you'll give.
• Customer cancellation rights, especially before an increase takes effect.
• Effect of continued use, if continued use after the notice period means acceptance.
• Existing prepaid periods, so customers know whether a price rise affects time they have already paid for.
• Usage fees, if variable charges can change separately from base subscription fees.

For example, if you run a project management software platform, you might say that annual plan fees are fixed for the paid annual term, but may change on renewal if you give at least 30 days' notice before the renewal date. That's much clearer than changing the fee halfway through a prepaid year.

Make The Online Acceptance Process Clear

For online contracts, you should make customers actively accept your terms before purchase or renewal. A checkbox, clear statement near the payment button, or account notice can help show that the customer had a chance to review the terms.

Your records should also show:

• which version of the terms applied when the customer signed up;
• when price increase notices were sent;
• which email address or account was notified;
• whether the email bounced; and
• whether the customer continued using the service after the notice period.

Those records are easy to overlook when you're moving quickly, but they can make a big difference if a customer challenges an invoice later.

What Are Your Options If Your Current Contract Has No Price Variation Clause?

If your current contract has no price variation clause, you usually need to rely on agreement, renewal, termination rights or new terms for future orders. You should be careful not to treat silence as permission to increase prices.

Here are some practical options.

Ask Customers To Agree To A Variation

You can ask customers to agree to a written contract variation. This could be a short letter or email that confirms the new price, start date and any other changed terms.

This is often the cleanest option for valued customers. It gives you a chance to explain the reason for the increase and keep the relationship positive.

Change Prices At Renewal

If the contract has a fixed term, you may be able to keep the current price until the term ends and offer renewal at the new price. This is usually safer than trying to change the price mid-term.

Your renewal communication should make it clear that the old price ends on a particular date and the new price applies only if the customer renews.

Use Your Termination Right Carefully

If your contract allows you to terminate on notice, you may be able to give notice that the existing contract will end, and offer a new contract at the new price.

This needs to be handled carefully. If you provide essential services, have minimum term commitments, or deal with consumers, you should check your contract and compliance position before relying on termination as part of a pricing change.

Update Terms For Future Customers

Even if you can't change existing contracts straight away, you can improve your terms for new customers. You can also use updated terms for future renewals, new orders or new service packages.

This is a good moment to review the rest of your customer terms too, including payment timing, late payment fees, service scope, cancellation rights, liability limits, privacy wording and intellectual property ownership.

Key Takeaways

• You can usually change prices only if your contract allows it, your customer agrees, or the change applies to a new order or renewal.
• A clear price variation clause should cover timing, notice, method of notice, customer cancellation rights and whether changes apply to existing work.
• Unfair contract term rules under the Fair Trading Act can apply to standard form consumer contracts and small trade contracts worth $250,000 or less per year, including GST.
• Price increase notices should be direct, clear and sent before the new price starts. Hiding a rise in fine print can create compliance and customer trust issues.
• For subscriptions, make sure your online sign-up and renewal process clearly records acceptance of your pricing terms.
• If your current contract has no price variation clause, consider a written variation, renewal pricing, or updated terms for future customers.

If you'd like help with your customer contracts, price increase wording, subscription terms or terms of trade, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.