When is a consumer contractual term unfair? As part of a series of articles on UK consumer protection law, we look at the rules on unfair contract terms under the Consumer Rights Act 2015.
Part 2 of the Consumer Rights Act 2015 (CRA) covers rules on unfair contract terms in consumer contracts.
What is covered?
- Consumer contracts (other than for employment or apprenticeship).
- A notice to the extent that it relates to rights or obligations between a trader and a consumer or purports to exclude or limit a trader’s liability to a consumer. A notice does not have to be in writing but is any communication or announcement as long as it is reasonable to assume it is intended to be seen or heard by a consumer.
- Written terms of a consumer contract or notice in writing must be transparent (in plain and intelligible language and legible if written).
- No exclusion or limitation for liability for death or personal injury arising from negligence will be valid.
- Where a clause is not binding as a result of being unfair, the rest of the contract will take effect as far as practicable.
- Where a term can have more than one meaning, the interpretation most favourable to the consumer will prevail.
What are the general rules about fairness of contract terms and notices?
- Contract terms and notices must be fair. An unfair term or notice will not be binding on the consumer unless the consumer chooses to be bound by it.
- A term will be unfair if, contrary to good faith requirements, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.
- A term of a consumer contract may not be assessed for fairness where it specifies the main subject matter of the contract or the assessment is of the appropriateness of the price payable, provided the term is transparent (in plain and intelligible language and legible where written) and prominent (brought to the consumer’s attention in such a way that the average consumer would be aware of it).
What terms may be regarded as unfair?
- Schedule 2 of the CRA sets out an "indicative and non- exhaustive" list of terms in consumer contracts which may be regarded as unfair. This includes three new "grey list" terms: disproportionately high charges where the consumer decides not to conclude or perform the contract or for services which have not been supplied, even where the consumer cancels the contract; terms allowing the trader to determine the characteristics or subject matter after the consumer is bound; and terms allowing the trader to determine the price after ;the consumer is bound.
- A term of a consumer contract must be regarded as unfair if it has the effect that the consumer bears the burden of proof regarding compliance by a distance supplier or an intermediary with an obligation under any enactment or rule implementing the Distance Marketing Directive (relating to the distance marketing of consumer financial services).