Alex is Sprintlaw's co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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Cancellations are a normal part of doing business in New Zealand - but they can also be expensive.
If you run a small business (especially one that books out time, staff, or inventory), a last-minute cancellation can mean you’ve reserved a spot you can’t resell, turned away other customers, or paid contractors to show up for nothing.
That’s why many NZ businesses use cancellation fees (sometimes called “no-show fees”). The tricky part is making sure your fee is lawful, fair, and enforceable - and that you’re not creating problems under the Fair Trading Act 1986 or Consumer Guarantees Act 1993.
Below, we’ll walk you through when it’s generally legal to charge a cancellation fee in NZ, when it can backfire, and how to set up your terms so you’re protected from day one. This article is general information only and not legal advice.
What Is A Cancellation Fee (And Why Do Businesses Use Them)?
A cancellation fee is a charge you apply when a customer cancels a booking, appointment, reservation, or service - usually within a particular timeframe (for example, “within 24 hours”) or when they don’t attend at all (“no-show”).
From a business perspective, cancellation fees are usually meant to cover things like:
- lost revenue (you held a spot that you couldn’t re-sell in time)
- staffing and contractor costs (you rostered staff or booked a contractor based on that booking)
- set-up and admin time (you did prep work or admin before the booking)
- opportunity cost (you declined other clients because your schedule was full)
Cancellation fees are common across industries like:
- health and wellness (physio, counselling, massage, personal training)
- beauty (hair, nails, cosmetic services)
- trades and mobile services (call-out fees, scheduled installs)
- events and venues (hire periods, equipment, catering)
- professional services (consulting, photography, coaching)
But whether you can actually enforce a cancellation fee depends on how you set it up.
When Is It Legal To Charge A Cancellation Fee In NZ?
In broad terms, it’s usually legal to charge a cancellation fee in NZ if your fee is:
- clearly disclosed upfront (before the customer commits)
- contractually agreed (your customer accepts your terms)
- reasonable for the loss you’re likely to suffer
- not misleading in how it’s described or applied
Let’s break that down in a practical way.
1) Your Customer Needs To Know About The Cancellation Fee Before They Book
This is where many small businesses get caught out.
If your cancellation fee is buried in a hard-to-find link, only mentioned after the booking is confirmed, or only displayed at the front counter (after the customer has already travelled in), you can expect disputes.
From a consumer law perspective, you want to be confident you’ve been transparent under the Fair Trading Act 1986 (which prohibits misleading or deceptive conduct). Even if your fee might have been “standard in your industry”, you still need to clearly communicate it to your customers.
Practical ways to disclose your cancellation fee include:
- including it on the booking page (before payment)
- displaying it as part of checkout/confirmation (“By booking, you agree…”)
- including it in your confirmation email and SMS reminders
- having it in your Business Terms and linking those terms where customers book
2) The Cancellation Fee Needs To Be Part Of The Contract
A cancellation fee works best when it’s part of a clear contract between you and your customer.
Depending on how your business operates, that contract might be:
- your online booking terms
- your signed client agreement
- your quote and acceptance process
- your standard service terms
For service-based businesses, a tailored Service Agreement can be a great place to set out cancellation rules (including notice periods, rescheduling rules, deposits, and when fees apply).
3) The Fee Should Be A Genuine Reflection Of Likely Loss (Not A Punishment)
This is the heart of what makes a cancellation fee “fair” and more likely to be enforceable.
While NZ contract law can get technical, the commercial reality is simple: a cancellation fee should be designed to compensate you for genuine costs and losses caused by the cancellation - not to punish the customer for cancelling.
That usually means:
- the fee is linked to the amount of notice given (e.g. smaller fee for 48 hours’ notice, larger fee for same-day)
- the fee is linked to the type of booking (e.g. longer bookings have higher potential loss)
- the fee reflects real business impacts (staff, prep, supplier commitments, lost slot)
If your fee looks wildly out of proportion to the booking value or your real costs, it becomes easier for a customer to argue it’s unfair - and harder for you to justify if the dispute escalates.
4) Be Extra Careful If You’re Dealing With “Consumers” (Not Businesses)
If your customer is a “consumer” (in everyday terms: they’re buying for personal or household use), then NZ consumer protections are front and centre.
In that case, your cancellation fee should be especially clear and especially reasonable. You also need to make sure you’re not undermining the customer’s rights under the Consumer Guarantees Act 1993 (for example, you can’t use cancellation terms to avoid providing remedies when your service was not provided with reasonable care and skill).
If most of your work is B2B, you may have more flexibility - but “more flexibility” doesn’t mean “anything goes”. You still want clean, well-drafted terms.
When Can A Cancellation Fee Be Unfair, Risky, Or Unenforceable?
Even if you’ve had a cancellation fee in place for years, there are common scenarios where charging it (or refusing to waive it) can create legal and reputational risk.
1) The Fee Wasn’t Properly Disclosed
If the customer didn’t have a real chance to see the cancellation fee before booking, you may struggle to rely on it.
In practice, that can lead to:
- chargebacks (if paid by card)
- negative reviews and reputational damage
- complaints that your business terms are misleading
Tip: your best protection is to embed the cancellation fee directly into your booking flow and written terms, rather than relying on signage or “we always do this”.
2) The Fee Looks Like A Penalty (Not A Cost-Recovery Amount)
A flat fee that applies in every scenario can sometimes be fine - but it depends on your business model.
Where it becomes risky is when it looks punitive, for example:
- charging 100% of the booking value for a cancellation days in advance
- charging a large fee where you can easily rebook the slot
- charging a cancellation fee and reselling the same slot (without adjusting)
A customer may argue the amount is unfair, and a dispute can quickly become more expensive than the fee itself.
3) The Term Could Be An “Unfair Contract Term”
New Zealand’s unfair contract terms regime (under the Fair Trading Act) can apply to standard form contracts - including many standard form consumer contracts and, in some cases, standard form “small trade contracts” between businesses.
A cancellation fee clause may be at risk if it:
- creates a significant imbalance in the parties’ rights, and
- is not reasonably necessary to protect your legitimate interests, and
- would cause detriment to the consumer or small business if relied on
This doesn’t mean you can’t charge a cancellation fee. It means your clause needs to be carefully drafted and justifiable for your business.
4) You’re Using The Fee To Cover Your Own Non-Performance
A cancellation fee shouldn’t be used to paper over issues where your business didn’t deliver what was promised.
For example, if you cancel on the customer, show up late, or can’t provide the service as agreed, charging the customer a cancellation fee may trigger disputes under both contract principles and consumer law.
5) You’re Applying The Fee In A Way That Conflicts With Your Own Terms
If your cancellation policy says “no fee if you cancel more than 48 hours before”, but your team charges it anyway, that inconsistency can cause real headaches.
Inconsistent enforcement can also look unfair, particularly if it appears arbitrary or discriminatory.
How Do You Set Up A Cancellation Fee Policy That Protects Your Business?
If you want your cancellation fee to stick (and to reduce arguments), you need two things working together:
- well-written terms that reflect how your business actually operates
- good admin systems so customers get reminded and your team applies the policy consistently
Step 1: Decide What Loss You’re Actually Trying To Cover
Start with the practical reality. Ask:
- What costs do we incur once a customer books?
- At what point does it become hard to rebook the slot?
- Do we pay staff/contractors regardless of attendance?
- Do we buy supplies in advance?
This helps you set a fee structure you can justify if challenged.
Step 2: Use A Tiered Structure Where It Makes Sense
Tiered cancellation fees are often seen as more reasonable because they reflect increasing loss as the booking gets closer.
For example:
- More than 48 hours’ notice: no fee / reschedule allowed
- 24–48 hours’ notice: 25% of booking value
- Same-day cancellation: 50% of booking value
- No-show: 100% (or a fixed no-show fee)
Not every business needs tiers - but if you’re in a high-dispute industry, it can help.
Step 3: Put It In Writing In The Right Place
Your cancellation fee clause should live where customers will actually see it and agree to it.
Common documents and places include:
- your online booking terms (often part of your Website Terms and Conditions)
- a customer contract or booking agreement
- quotes and invoices that reference your standard terms
- your Returns, Refunds and Exchanges approach (where relevant, to keep messaging consistent)
If you sell services to business customers (or do a mix of B2B and B2C), you may also want your Terms of Trade to include cancellation and rescheduling rules.
Step 4: Write The Clause Clearly (And Avoid Overreaching Language)
Clear beats clever every time.
Your clause should spell out:
- how much the cancellation fee is (or how it’s calculated)
- when it applies (timeframes, no-shows, partial attendance)
- how to cancel (email, phone, booking platform)
- rescheduling rules (and whether rescheduling avoids the fee)
- any exceptions you’re willing to consider (more on that below)
If your terms are too aggressive (for example, “no refunds ever” in situations where consumer law may require one), you’re more likely to face disputes. If you need to manage expectations around limits of liability generally, a properly drafted Disclaimer can also help - but it won’t “override” consumer guarantees.
Step 5: Support The Policy With Good Processes
Even the best cancellation fee clause won’t help if your processes are messy.
Consider:
- sending automated reminders (48 hours and 24 hours before)
- including a “cancel/reschedule” link in reminders
- keeping logs of communications (helpful if there’s a dispute)
- training staff on when to charge, waive, or escalate
This doesn’t just reduce disputes - it also improves customer experience, which matters just as much as legal enforceability.
Can You Refuse To Waive A Cancellation Fee? Handling Exceptions Fairly
Many business owners ask: “If our terms say there’s a cancellation fee, do we have to waive it when a customer has a ‘good reason’?”
Usually, if your terms are clear and fair, you can enforce them - but refusing to waive a cancellation fee can still be risky in certain situations.
When It’s Often Reasonable To Hold The Line
It’s generally easier to justify refusing to waive a cancellation fee when:
- you gave clear notice of the policy upfront
- you sent reminders before the cancellation window closed
- the cancellation was within the timeframe your terms specify
- you genuinely couldn’t rebook the slot
- your fee is proportionate to the booking value and your loss
Example: If you run a studio with limited appointments and a customer cancels two hours before their session, enforcing a no-show or late cancellation fee is usually commercially reasonable.
When You Might Want To Consider Waiving (Or Reducing) The Fee
Even if you’re legally entitled to charge a cancellation fee, there are scenarios where a rigid approach can do more harm than good - and sometimes could raise fairness issues.
Common examples include:
- your business caused the issue (e.g. the booking system failed or you changed the appointment time)
- genuine emergencies (e.g. hospital admission) - you might choose to waive as goodwill
- where you were able to rebook (in some cases, keeping the full fee may look excessive)
- repeat loyal customers (commercial decision: relationship value)
A practical middle-ground is to build discretion into your policy, for example: “We may waive the fee at our discretion in exceptional circumstances.”
Just be careful: if you apply discretion inconsistently, you can create confusion and complaints. Make sure your team understands what counts as “exceptional” and when a manager should approve a waiver.
If You’re Unsure, Get Advice Before You Roll The Policy Out
A cancellation fee policy touches contract terms, marketing, customer communications, and consumer law compliance.
If you want confidence you’re on the right track (especially if you’ve had disputes before), it can be worth getting a quick legal sense-check through a Consumer Law Consultation Package.
Key Takeaways
- A cancellation fee is usually legal in NZ if it’s clearly disclosed upfront, forms part of the contract, and is reasonable for the loss you’re likely to suffer.
- Your cancellation terms should comply with key NZ laws, including the Fair Trading Act 1986 (no misleading conduct) and the Consumer Guarantees Act 1993 (consumer rights generally can’t be contracted out of for consumer transactions).
- Cancellation fees are more enforceable when they reflect genuine cost recovery rather than looking like a penalty, and when they’re applied consistently.
- Build your cancellation policy into the documents your customers actually accept - such as your Business Terms, Website Terms and Conditions, Service Agreement, or Terms of Trade.
- Even where you can legally refuse to waive a cancellation fee, having a sensible “exceptional circumstances” approach can reduce disputes and protect your reputation.
- Getting the clause drafted properly (instead of copying a template) is one of the easiest ways to protect your business from day one.
If you’d like help drafting or reviewing your cancellation fee terms (or dealing with a cancellation dispute), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
