The Act also re-states and expands the existing law concerning unfair terms in consumer contracts.
The basic requirements are that contract terms must be fair.
The law says that a term is unfair if “contrary to the requirements of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.”
This fairness test applies not only to terms in the contract but also to consumer notices – e.g. notices in car parks, as well as notices appearing online on a website.
All written terms in a consumer contract or in a consumer notice must be transparent – i.e. expressed in plain and intelligible language.
Any term in a consumer contract or a consumer notice attempting to limit or exclude the trader’s liability for death or personal injury resulting from negligence is unlawful and not enforceable. (So a bungee jumping company can’t get you to sign away your rights – if the bungee fails, that will still be their fault.)
Similarly any term attempting to limit or exclude the various terms implied by the Act (satisfactory quality etc.) are unfair and unenforceable.
What Is ‘Unfair’?
Schedule 2 of the Act contains 20 examples of terms that may be regarded as unfair. These include:
- Disproportionately high charges when a consumer decides not to carry on with a contract or with services which have not been supplied
- Terms that allow the trader to decide the subject matter after the consumer is bound by the contract
- A term allowing the trader to fix the price after the consumer is already bound by the contract
- A term designed to limit the trader’s liability in the event of death or personal injury of the consumer that results from some act or omission of the trader
- A term designed to exclude or limit the consumer’s rights if the trader does not perform his obligations adequately
- A term that allows the trader to bring the contract to an end without reasonable notice unless there are serious grounds for doing so
- A term which has the effect of binding the consumer to terms which he has had no real opportunity of becoming acquainted with before the conclusion of the contract.
The test of fairness will not apply to a term in a contract that specifies the subject matter of the contract, nor will the price be subjected to a fairness test. But for the exemption to apply, the subject matter and the price must be prominent and transparent – i.e. in plain English and intelligible.
What You Need To Do
All businesses need to review their contract terms at this stage to see that they do not fall foul of the Consumer Rights Act and the updated Unfair Terms requirements incorporated in it. Although much of the existing legislation is retained, there are new provisions as well.
- The Consumer Rights Act can be found here: http://www.legislation.gov.uk/ukpga/2015/15/contents/enacted
- Terms and Conditions templates from Contractstore can be found here: http://www.contractstore.com/sale-and-purchase-of-goods-and-services