Unfair Terms in Consumer Contracts

What is an unfair term?

An unfair term in a contract is a term that goes against the principle of good faith which results in an imbalance between the rights and obligations under the contract to the detriment of the consumer.

Unfair Terms of Contract Regulations 1999

The Unfair Terms of Contract Regulations 1999 (the Regulations) is a regulation that implements a European Council Directive for the purpose of coordinating the laws and regulations of the member states that relates to unfair terms in contracts between a business seller or supplier and a consumer.

The Seller

A seller is a person who sells goods and contracts with the consumer in relation to his business.

The Supplier

A supplier is a person who supplies goods or services and contracts with the consumer in relation to his business.

The Consumer

A consumer is a natural person who in making a contract is acting for purposes outside of his business.

Application of the Regulations

The Regulations apply to a term of a contract between a seller or supplier and a consumer that was not negotiated between the parties. Usually the consumer in such contracts is required to sign the supplier’s or seller’s standard term contracts.

Excluded Contracts

The Regulations relate primarily to consumer supply contracts. The following contracts are excluded from the Regulations:

Plain and intelligible language

It is a requirement of the Regulations that written consumer contracts must be in plain and intelligible language. If there is uncertainty as to the meaning of a contractual term the interpretation that is beneficial to the consumer should be adopted.

Excluded Terms

The following terms are excluded from an assessment of fairness under the Regulations:

  •       Contractual terms that define the main subject matter of the agreement (the core bargain)

  •       Contractual terms that relate to the adequacy of the price or remuneration in relation to the agreement

Effect of Unfair Terms

If a term of a contract is determined by the Court to be unfair it will not be binding on the consumer. The Contract will continue to be valid if it is capable of continuing without the unfair term.

Unfair Terms in Lettings Agreement

The Court of Appeal in the landmark case of Office of Fair Trading v Foxton [2009] has ruled that terms in a tenancy that are not plain and intelligible and provisions relating to the renewal of commission fees payable by the landlord to the estate agent for finding a tenant where the tenant continues to occupy the property after the initial fixed period in circumstances where the estate agent does not manage the property or persuade the tenant to stay could not escape an assessment of fairness.

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For more information on:

  • Fairness inquiry
  • Response by the Office of Fair Trading
  • Unfair Terms and Bank Charges