Unfair Terms in Consumer Contracts Regulations 1999: A guide
The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs or Regulations) protect consumers against unfair standard terms in contracts they make with businesses. They are of no use where the contract terms have been individually negotiated.
The OFT, and certain other bodies, can take action to prevent the use or recommendation of such terms, but cannot intervene in a private dispute on an individual's behalf. Consumers can also rely on the Regulations in disputes with businesses over standard contract terms.
The UTCCRs protect consumers from terms that reduce their statutory or common law rights and from terms that seek to impose unfair burdens on the consumer over and above what is allowed by ordinary rules of law.
This article explains unfair contract terms and what the OFT and other bodies can do to protect consumers against the use of unfair terms by businesses.
What does UTCCR say?
Simply put, a consumeris not bound by a standard termin a contract with a seller or supplierif that term is unfair.
What is an unfair term?
First need to know a few definitions:
A consumer is an individual not acting for the purposes of his or her business or profession.
Standard terms are those devised by a business in advance, not individually negotiated with the consumer. They do not have to be in writing but are often found in the 'small print' on the back of order forms, brochures, bills, and so on. The Regulations do not apply to any term that can be shown to have been individually negotiated, but instead, apply to any standard terms in the same contract.
A seller or supplier is any person or organisation acting for the purposes of their business.
Business includes any trade or profession, as well as governments and other public bodies.
When is a term unfair: test of fairness
When deciding whether a term is unfair, the court implements the ‘test of fairness’ and the ‘plain language’ requirement. A standard term is unfair if it creates a significant imbalance in the parties' rights and obligations under the contract, to the detriment of the consumer, contrary to the requirement of good faith. Good faith simply requires businesses to deal fairly and openly with consumers. This principle must be reflected in the way consumer contracts are drafted. Standard terms may be drafted to protect commercial needs but must also take account of the interests and rights of consumers. The terms must be simple, fair and not over the top.
What this means is illustrated by examples of types of unfair term listed in Schedule 2 to the Regulations (see below).
In assessing the fairness of a term, the following must be taken into account:
- the nature of the goods or services
- all the circumstances surrounding the making of the contract
- the other terms in the contract
- the content of any other contract that is linked to the one under review.
Plain language
A standard term must be expressed in plain and intelligible language. A term is more likely to be considered unfair if it is poorly drawn and therefore puts the consumer at a disadvantage because he or she is not clear about its meaning. Of course this is why all Net Lawman documents are written in plain English, not legalese.
Terms exempt from the regulations
Most standard terms are covered by the UTCCRs. The exceptions are those:
- that reflect provisions that by law have to be included in contracts or are explicitly allowed
- that have been individually negotiated
- in contracts between businesses (because it is presumed that businesses have an equal standing to begin with)
- in contracts between private individuals (for the same reason as above)
- in certain contracts that people do not make as consumers, for example, relating to employment, succession rights, family law or setting up a business
- in contracts entered into before 1995
- that set the price or define the product or service. Terms in consumer contracts that set the price or define the product or service being supplied are 'core terms' of the contract and are exempt from the test of fairness as long as they meet the plain language requirement.
Frequent unfair terms
Schedule 2 to the Regulations lists a number of standard terms that are frequently unfair. The list is not exhaustive. Similarly, a term is not necessarily unfair just because it appears in the list.
There are more familiar terms which are not on the list yet which are often sited as being unfair. They are terms that:
- mislead the consumer about the contract or the consumer's legal rights
- deny full redress if things go wrong
- tie the consumer into the contract unfairly
- release the business from performing its obligations
- cause loss of prepayments made by the consumer if the contract is cancelled
- enable the business to vary its terms after the contract has been agreed
- allow the business to impose unfair penalties on the consumer.
A term is unfair: what is the result?
If a consumer argues that a term is unfair but a business disagrees, either can ask for the help of a court. If the court decides that the term is unfair, the business will not be allowed to rely on that term against the consumer.
If a term is unfair, it is not legally binding on the consumer. The rest of the contract operates as usual, unless it is unworkable without the unfair term.
Who enforces the UTCCRs, and how?
The OFT has a duty to enforce the Regulations. In addition, certain other public authorities, and one other organisation, can take enforcement action.
The OFT's powers
The OFT determine whether a term is or is not unfair or whether any individual consumer is entitled to compensation. It has a duty under the Regulations to consider any complaints about the unfairness of a contract term and if it believes that a term is unfair, it has powers to ask a court for an injunction to prevent it being used or recommended for use. It may also seek a court order under the Enterprise Act, particularly where there are other breaches of consumer law as well as use of unfair terms. However, only the courts can finally decide whether a term is or is not unfair.
The OFT negotiates with traders, and with trade associations and other organisations that recommend model terms to their members, to secure the revision or deletion of unfair terms, and may accept suitable undertakings given to the OFT instead of taking court action.
Yours terms and conditions: do they comply?
Here are some tips to ensure your business terms comply:
- check what legal rights consumers have, and avoid trying to get round them or cutting back on them
- don't just copy a competitor's contract
- write in plain English
- avoid jargon or Latin terms
- use headings, captions, boxes etc to divide the information and make it easier to read
- avoid long sentences or paragraphs
- important terms should be given sufficient prominence, for instance by being put first, or using large or bold print
- avoid using very small print
- avoid printing contracts on flimsy or coloured paper and/or using faint ink.
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