Legal protection available for unfair terms in a contract

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.

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For more information on:

  • Unfair Terms
  • How do the courts assess an unfair term?
  • The Requirement of good faith
  • Plain intelligible language- Interpreting the terms