Unfair Terms in Contracts With Consumers Quick Facts
Relevant or Related Legislation:
Unfair Terms in Consumer Contracts Regulations 1999
Key Facts:
• A consumer is an individual not acting in the course of his or her business or profession.
• A consumer is not bound by a standard term in a contract with a seller or supplier if that term is unfair.
• Standard terms are those devised by a business in advance and not individually negotiated with the consumer. They do not have to be in writing but typically are found in the ‘small print’ on the back of order forms etc.
• A standard term is unfair if it creates a significant imbalance in the parties’ rights under the contract, to the detriment of the consumer, contrary to the requirement of good faith.
•The Regulations do not cover price-setting terms or terms defining the product (known as core terms).
• All terms (including core terms) must be in plain intelligible language otherwise they are open to challenge as unfair.
• The Office of Fair Trading (OFT) and certain other named authorities have powers under the Regulations to stop businesses using unfair standard terms and anyone from recommending the use of such terms. The OFT has a duty to consider any complaint sent to it that a contract term drawn up for general use is unfair. Other named bodies are not obliged to accept complaints for consideration.
Frequently Asked Questions (FAQs)
Q1. What exactly does the definition of an unfair term mean?
Q2. Apart from individually negotiated and core terms are there any other standard terms not covered by the Regulations?
Q3. What does a consumer do if a firm refuses to accept that a term is unfair?
Q4. Who are the other qualifying bodies that can take action against unfair Terms?
Q5. Standard terms are often in small print that is difficult to read. Is this covered?
Q6. If a term of the contract is unfair does this invalidate the rest of the contract?
Q7. How does the OFT assess whether a standard contract term is unfair?
Q8. What action can OFT and the other enforcement authorities take to prevent the continued use of unfair terms?
Q9. Where can I get advice about unfair contract terms?
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Q1. What exactly does the definition of an unfair term mean?
An unfair term is one that creates a significant imbalance in the parties’ rights under the contract, to the detriment of the consumer, contrary to the requirement of good faith.
A term is most likely to cause an imbalance if it has the effect of reducing the consumer’s rights under the ordinary rules of contract or the general law. For example they either stop consumers from making certain sorts of legal claim against the business which they could otherwise have made, or give the business rights against the consumer that it would not otherwise have had.
But a term causing an imbalance must be capable of causing detriment to consumers. taken together with the other terms in the contract.
The requirement of good faith embodies a general ‘principle of fair and open dealing’. It does not simply mean that a term should not be used in a deceitful way. Suppliers are expected to respect consumers’ legitimate interests in drafting contracts, as well as negotiating and carrying them out.
Q2. Apart from individually negotiated and core terms are there any other standard terms not covered by the Regulations?
Yes. Terms reflecting the law, i.e. terms which must be included in the contract by law, or which the law explicitly says are allowed, are not covered. For instance, international treaties sets limits on the compensation airlines have to pay for loss or injury caused to passengers, and these limits are incorporated into UK law. But these terms must reflect the law adequately, not in a misleading way, and can be unfair if they give an advantage to the business beyond the minimum that the law allows.
Q3. What does a consumer do if a firm refuses to accept that a term isunfair?
For the individual consumer, the Regulations mean that if a business refuses to accept that a term is unfair, the consumer can ask the help of the court. If the court agrees with the consumer, the business will not be allowed to rely on that term. But, it is essential for the consumer to seek legal advice before becoming involved in a dispute that could lead to court proceedings.
Q4. Standard terms are often in small print that is difficult to read. Is this covered?
The Regulations require that plain and intelligible language is used in consumer contracts. The plain language rule is part of a wider requirement that consumers should be able to read and understand terms before becoming bound by them. So, contract terms which are hard to understand because of obscure wording or unreadable small print can be found to be unfair.
Q5. If a term of the contract is unfair does this invalidate the rest of the contract?
The fact that an unfair term is unenforceable does not mean that the rest of the contract is void, unless it is unworkable without the unfair term.
Q6. Who are the other qualifying bodies that can take action against unfair terms?
They include local trading standards authorities, utility regulators, and the Consumers’ Association. A full list appears In Schedule 1 to the Regulations.
Q7. How does the OFT assess whether a standard contract term is unfair?
The OFT’s starting point in assessing the fairness of a term is normally to ask what would be the position for the consumer if it did not appear in the contract. Where a term changes the normal position seen by the law as striking a fair balance it is regarded with suspicion.
Q8. What action can OFT and the other enforcement authorities take toprevent the continued use of unfair terms?
The Regulations permit enforcement authorities to consider appropriate undertakings by businesses about the use of contract terms with consumers. If necessary an application for an injunction (in Scotland, an interdict) can be made through the courts against anyone who is using or recommending the use of an unfair term.
Q9. Where can I get advice about unfair contract terms?
The Department for Business, Enterprise and Regulatory Reform (BERR) does not deal with individual consumer enquiries or complaints. If you have an enquiry please contact Consumer Direct at: www.consumerdirect.gov.uk (Tel: 08454 04 05 06). Consumers in Northern Ireland should contact Consumer Line on 0845 600 6262.