Dealing with Consumers? Make Sure Your Terms and Conditions are Fair The long and short of it is that, under the Unfair Contract Terms in Consumer Contracts Regulations 1999 (the UTCCR), an unfair contract term is not binding on consumers.
Dealing with Consumers? Make Sure Your Terms and Conditions are Fair
The long and short of it is that, under the Unfair Contract Terms in Consumer Contracts Regulations 1999 (the UTCCR), an unfair contract term is not binding on consumers.
The courts will not uphold:
But the contract will still bind the parties if it is capable of existing without the unfair term.
If a consumer contract has a close connection with the territory of any Member State of the EU, the UTCCR will apply even if the contract says that the laws of a country outside the EU apply to the contract.
What is an unfair contract term?
It is a term which:
Schedule 2 of the UTCCR contains a non-exhaustive list of terms which might be unfair if they are included in a contract with a consumer. Please see our article Dealing with Consumers? Include Unfair Terms your Peril for more details.
Clarity and good faith
Terms must be clear and intelligible to consumers; the test is not whether a lawyer understands them.
If terms are not in plain and intelligible language they may be unfair even if they relate to the adequacy of the price or the main subject matter of the contract - the lack of clarity means that the consumer cannot make an informed choice, and that is unfair.
In an attempt to bring exclusion and limitation terms within the law, suppliers often include a term which says that the customer's statutory rights are not affected. That sort of wording will not save an unfair disclaimer – contradicting a disclaimer by using words which only a lawyer might understand will not make a limitation or exclusion term fair and binding.
If there is any doubt about the meaning of a term, the term will be interpreted in the way which is most beneficial to the consumer.
The requirement of good faith means suppliers must deal openly and fairly with consumers. Terms which might disadvantage the consumer should be given sufficient prominence and suppliers should not take advantage of the consumer’s weaker bargaining position or lack of experience.
How this works in practice – the Foxtons case
The Office of Fair Trading (OFT) (among others) can apply for an injunction to prevent businesses from relying on unfair terms in consumer contracts. Normally the OFT negotiates with suppliers to get them to agree to make their terms fairer (as it has done with Ryan Air who agreed to make the terms on their website about charges for checked in baggage more prominent), but Foxtons, the letting and estate agents, refused to change their terms and conditions to the extent required by the OFT. The OFT went to court.
Foxtons’ terms included the right to be paid commission in the following circumstances:
The High Court held that these provisions were unfair even though they related to Foxtons’ remuneration. The court did not think that these provisions were part of the ‘core bargain’. They were therefore subject to the reasonableness test of the UTCCR.
The rationale for the court’s decision in the Foxtons case
The court’s rationale was:
And what is a consumer?
The UTCCR defines a consumer as a natural person (that is an individual) who is acting for purposes which are outside his trade, business or profession. In some cases landlords will be in the business of letting property, but in the Foxtons case the court treated the landlords as consumers because many of them would have only one or two properties to let and sometimes might just be letting rooms in a house.
If you would like further advice about any of the issues considered above please contact
Christine Reid on 01865 864195 or email her at firstname.lastname@example.org.
This article is not intended to be, and should not be taken as being, legal advice. The law often changes and it varies from jurisdiction to jurisdiction; the information in this article is generic in nature and specific legal advice should be taken before acting on any of it.
© Northwood Reid 2009. The use, copying and dissemination of this article are subject to our