Dealing with Consumers?  Include Unfair Terms at your Peril


The basics

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:

  • obligations to pay based on an unfair term; or
  • unfair limitations and exclusions of liability on the part of the supplier.

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.

For an explanation of the general principles of the UTCCR, please see our article Dealing with consumers? Make sure your terms and conditions are fair.

What is a consumer?

The UTCCR defines a consumer as a natural person (an individual) who is acting for purposes which are outside his trade, business or profession.

Examples of potentially unfair terms

The Office of Fair Trading (OFT) has published guidance  which explains the basis on which the OFT is likely to take action to prevent the use of unfair terms.

The problem is that the guidance runs to 87 pages without its annexes. Annex A contains useful examples of fair and unfair clauses, but that annex alone runs to some 139 pages. Most businesses do simply not have the time to familiarise themselves with the OFT guidance.

Schedule 2 of the UTCCR contains a non-exhaustive list of terms which might be unfair if they are included in a consumer contract.  Businesses which deal with consumers should be aware of the contents of that Schedule. 

The terms listed in Schedule 2 are terms which:

  • exclude or limit the supplier’s liability for the death or injury of the consumer caused by the supplier’s act or omission;
  • inappropriately exclude or limit the consumer's rights if the supplier does not perform the contract. (This includes excluding the consumer’s right to offset a debt owed to the supplier against any claim which the consumer may have against the supplier.);
  • make the contract binding on the consumer, but allow the supplier not to comply with the contract if it does not wish to do so;
  • allow the supplier to retain a deposit or advance payment made by the consumer if the consumer decides not to perform the contract, unless the consumer is allowed to receive an equivalent amount from the supplier if the supplier terminates the contract;
  • require a consumer who fails to perform his obligations to pay a disproportionately large amount by way of compensation;
  • allow the supplier to terminate the contract at the supplier’s discretion unless the consumer has the same right to terminate;
  • permit the supplier to retain money paid in advance if the supplier terminates the contract;
  • where the contract is of indefinite duration, allow the supplier to terminate the contract without giving reasonable notice, except where the supplier has serious grounds for termination;
  • automatically extend a contract of fixed duration if the consumer does not indicate that he does not want to extend and where the deadline by which the consumer must indicate that he does not want to extend the contract is unreasonably early;
  • irrevocably bind the consumer to terms with which he had no real opportunity of becoming acquainted before the contract is made – for instance a term under which the consumer is deemed to agree to the supplier’s terms by signing a delivery note, or by opening the packaging;
  • allow the supplier to vary the terms of the contract unilaterally without a valid reason, unless the supplier is obliged to give the consumer reasonable notice and the consumer has the right to terminate the contract. (The circumstances in which/the reasons for which the supplier may vary the contract unilaterally must be set out in the contract.);
  • allow the supplier to vary any characteristics of the product or service unilaterally without having  a valid reason;
  • allow the price to be set at the time of delivery or which allow the supplier to increase its prices without, in both cases, giving the consumer the right to terminate the contract if the final price is too high in relation to the price agreed when the contract was concluded.  (This does not prohibit index-linked price increases, provided that the index-linking is explicitly described.);
  • give the supplier the right to decide whether the goods or services are in conformity with the contract;
  • give the supplier the exclusive right to interpret any term of the contract;
  • limit the supplier's obligation to honour commitments undertaken by its agent;
  • make the supplier’s commitments subject to compliance with any particular formality;
  • oblige the consumer to perform all his obligations where the supplier does not perform its obligations – e.g. a term which excludes the supplier’s liability for late delivery, but which does not give the consumer the right to cancel the contract or to receive liquidated damages for delay;
  • give the supplier the right to transfer its rights and obligations under the contract without the consumer’s agreement, where this might reduce the guarantees for the consumer; and
  • exclude or hinder the consumer's right to take legal action or exercise any other legal remedy – e.g. a term which obliges a consumer to go to arbitration, or to sue in the supplier's local courts, or which imposes the burden of proof on the consumer when rightly it should lie with the supplier.


Contact Details


If you would like further advice about any of the issues considered above please contact

 Christine Reid on 01865 864195 or email her at christine.reid@northwoodreid.com.


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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.


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