The Unfair Terms in Consumer Regulations 1999

Basically this regulation applies a fairness test to the terms of the contract between the consumers and sellers or suppliers. 

This Act is applied to terms that have not been individually negotiated and any unfair term will not bind the consumer in any way.

What is a consumer?

Under section 3(1) of the Unfair Terms in Consumer regulations 1999 the law states that a consumer is: 

'Any natural person who, in contracts covered by these regulations, is acting for the purposes which are outside his trade, business or profession'. 

This definition exclusively limits a consumer to an individual; this will exclude all companies and businesses from being protected under this law as a consumer.

The definition of a 'seller or supplier'

Section 3 of the regulations state; 

'A seller or supplier means any natural or legal person who, in contracts covered by the regulations, is acting for the purposes relating to his trade, business or profession, whether publicly or privately owned'.

What are terms not individually negotiated?

The 1999 regulations will apply to all terms in the contract between a consumer and seller or supplier which has not been individually negotiated. 

Terms which are not individually negotiated will usually be the standard terms of a particular type of contract. These will be already written out in basic form on a standard contract and have not been negotiated to fit the requirements of the individuals which are parties to the contract.  

The burden of proving that a term was individually negotiated so that protection is not available under the 1999 regulations lies with the seller and supplier that are arguing that it was individually negotiated.  

A term shall always be regarded as being individually negotiated where it has been pre-drafted in advance of the contract being created, and therefore the parties to the contract have no say in whether they agree or disagree with the term.

The 'Core exclusions' of the rule

Under the 1999 regulations the fairness test is only applied to what is known as the subsidiary terms of the contract, however, the fairness test will also apply to other terms which are not in plain intelligible English. 

This is because the core terms of a contract cannot form the subject matter of the fairness test if they are worded in intelligible English.

What are the core terms?

The core terms of the contract are usually the terms that both parties have knowledge and understanding of and therefore require very little regulating. This is providing the parties to the contract have hidden in difficult language any clauses or exemption clauses.

Unfair Terms

According to the regulations a term is unfair if it causes any of the parties to suffer a significant unbalance of rights and responsibilities arising under the contract. 

The unfairness of a term will be assessed taking into account all the relevant circumstances at the time the contract has been negotiated.  

The assessment of the term will consider the nature of the goods or services provided through the contract, and will refer to them at the time the contract was concluded.

How do the courts assess an unfair term?

When a term looks in itself as an unfair term then the first point of call to consider is: 

Whether the term is potentially detrimental to the supplier to be included in the contract?  

In a case involving cancellation rights of the supplier, then we would regard this as a fair term providing that the consumer has equally extensive rights in relation to cancellations.

The Requirement of good faith

The requirement of good faith basically means that the contract should be created in a course of fair and open dealings. 

Openness requires that the all the terms of the contract are to be expressly stated and known, written in clear, legible terms and that there are no hidden traps or clauses that either party have no knowledge of.  

Fair dealings requires that a supplier or seller should not, whether deliberately, or as a result of an unconscious decision, take advantage of the consumers position, lack of experience or unfamiliarity with this type of contractual dealings. The seller or supplier should not take advantage of the consumer weak bargaining position and use their authority as a weapon against the creation of a fair contract. 

Plain intelligible language- Interpreting the terms

To determine whether or not a term is worded in plain, intelligible language, it must be asked to whom the term needs to be expressed to in plain intelligible language. 

The office of fair trading has answered this question by stating: 

'What is required is that the terms should be intelligible to ordinary member of the public'. 

It is the responsibility of the seller or supplier to ensure that any written terms of the contract are expressed in plain, intelligible language. 

If there is any doubt regarding the meaning of any terms, then the interpretation which is most favourable by the consumer shall prevail.