This is not only a matter of avoiding explicit conflict with the provisions of the PTR. Consumers will generally be unaware of their rights. A term may be unfair if, by not reflecting the PTR, it could mislead or confuse consumers.
The consequence of a standard term in a contract with a seller or supplier being unfair is that the consumer is not bound by it.
Some definitions might first be useful.
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?
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
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.
Commonly unfair terms in package holiday contracts
Below is a list of terms that have frequently been challenged as unfair.
Acceptance of responsibility for errors and changes in invoices or brochures
Because a brochure is published many months in advance, there may have to be changes during the 'life' of it. However, if that is the case, the consumer should be informed of the new details at the time of booking, and before entering into the contract.
Terms that exclude or limit a supplier's liability for changes made to the brochure's description of the holiday by, for example, failing to provide adequately for notification of changes pre-contractually, are likely to be considered unfair under the UTCCRs.
Similarly, a term should not limit or exclude liability for a failure to supply the holiday as described in the brochure.
Errors are often made on confirmation invoices. There is no objection to terms that advise the consumer to check the invoice and notify the supplier of any discrepancy as soon as possible. However, terms that seek to exclude or limit liability for errors on invoices by, for example, placing all the responsibility for checking their accuracy on the consumer, or imposing short deadlines for notification of errors, are likely to be unfair.
Old (unfair) term: It is important to check the details on the invoice when you get it; [The supplier's] responsibility is to supply you with the holiday as booked and confirmed to you.
New term: It is important to check the details on the invoice when you get it... In the event of any discrepancy, please contact us or your travel agent immediately.
Acceptance of responsibility for statements of agents, employees and representatives
Consumers decide whether or not to enter into a contract for a holiday on the basis of information and promises made to them at the time of booking.
With holiday contracts, the supplier's agent may make statements about, for example, the availability of childcare facilities, whether rooms will have a view, the distance of the hotel from a beach and so on, that induce the consumer to accept the holiday.
Terms excluding or limiting a supplier's obligation to respect either oral or written commitments made by their agents have the potential to be unfair.
Old (unfair) term: Representatives and agents are not entitled without [the supplier's] express authority to alter itineraries, cancel arrangements or tickets, make or promise refunds on our behalf or obtain loans or services or incur telecommunication expenses on your behalf.
New term: there is no replacement – simply delete the old term.
Consumer's right to transfer the holiday if prevented from travelling
Consumers have the right, where they are prevented from proceeding with the package holiday, and where they give reasonable notice, to transfer their participation in the holiday booked to a substitute who satisfies the conditions (if any) that apply to the package. The PTR do not specify the kinds of event that would qualify the consumer as 'prevented from proceeding' but the Office of Fair Trading (OFT) considers that they would include illness, death of a close relative, jury service and so on.
The person transferring the holiday and the substitute are individually and jointly responsible for paying the full amount due, namely the price of the holiday, together with any additional costs arising from the transfer. This is an important practical means by which consumers who are prevented from travelling can transfer their holiday.
The OFT will regard a term restricting the consumer's freedom to cancel as misleading and objectionable under the UTCCR if it is liable to cause consumers to believe that cancellation without paying cancellation charges is always impossible.
Such a term is much more likely to be acceptable if it acknowledges the consumer's right of transfer under the PTR.
Old term: Amendments cannot be made less than 30 days prior to departure.
New term: If any person on a package holiday is prevented from travelling, the company will agree to that person's booking being transferred to another person who satisfies all the conditions applicable to the package, subject to both persons accepting joint and several liability for full payment of the package price and the company's charge for confirming the transfer and any additional costs arising from the transfer. The company must be given reasonable notice of the transfer request, which is considered to be at least 14 days prior to the outward departure date.
Read and understood, declarations
Declarations that the consumer has read and understood the contract give rise to concern because they require the consumer to make a declaration regardless of whether it is true and may mislead consumers into believing that they cannot subsequently object to terms that are unfair. Declarations of this nature are potentially subject to challenge as being unfair contrary to the Regulations.
Much more acceptable is a clear and prominent warning that the consumer should read the terms before signing the contract.
Old (unfair) term: On behalf of all the persons named above by whom I am authorised to make this booking, I declare that I/We have read and agree to the Booking Conditions and that my/our booking is made subject to these conditions.
New term: there is no replacement – simply delete the old term.
Terms that exclude or hinder the consumer's right to take legal action or exercise any other legal remedy are very likely to be considered unfair.
Consumers should not be prevented from starting legal proceedings in their local courts – for instance by a term requiring resort to the courts of England and Wales when the contract may be used in another part of the UK having its own laws and courts. It is not fair for the aggrieved consumer to be forced to travel long distances and use unfamiliar procedures.
European and UK law lay down rules on this. Terms that conflict with these rules is likely to be unfair.
Old term: Finally you should note that all disputes between us will be governed by English law and are subject to the exclusive jurisdiction of the English Courts.
New term: 'Any dispute between us will be governed by the non-exclusive law and jurisdiction of the English or Scottish Courts.
All these points have been carefully covered in our tour operator terms and conditions document, written in the “non-legal” style for brochures commonly used in the travel industry.