Unfair terms in the context of consumer contracts were revisited by the Consumer Rights Act 2015, placing a greater emphasis on the consumer having greater access to their rights, as where a term is found unfair it is not binding on the consumer.
It is important to remember when assessing terms and conditions that the concept of unfair terms is a tool to redress the imbalance in bargaining power between a consumer and trader and this will, therefore, be carried through in any assessment as to what is likely to be unfair.
Terms may be considered unfair and where this is the case, will not be binding on the consumer. The remainder of the contract will continue as far as practicable and will have effect in every other respect.
First things first
To assess a term and its application, it is first necessary to establish what has been agreed. For this reason, it is important to make sure your terms and conditions are clear, easy to understand, and – possibly more importantly – written down. Many contracts or variations to contracts are agreed verbally and not recorded. If you set conditions on the performance of your service or the timeframe, for example, you will need to express these in a written way which makes it easy to find out what a consumer is signing up to.
What determines a term unfair?
The Consumer Rights Act states, ‘a term is unfair, if, contrary to the requirements of good faith, it causes significant imbalance in the parties’ rights and obligations under the contact to the detriment of the consumer.’ This includes terms that are not expressed in plain and intelligible language, making it difficult for them to be understood.
A trader cannot, by a term of a consumer contract or by a consumer notice, exclude or restrict liability for death or personal injury resulting from negligence. Where a term of the contract restricts a trader’s liability for negligence, it cannot be deemed that the consumer has voluntarily accepted any risk merely because the person agreed to or knew about the term or notice.
Where a consumer is entering into a contract on the basis of a fixed set of terms and conditions, it is reasonable to assume that these will always be subject to a test of fairness and that any uncertainty as to the meaning of a term will continue to be determined in favour of a consumer.
Fair means that terms must meet the requirements of good faith and fair and open dealing. Transparent means that terms must be written in plain and intelligible language and be legible. Terms should be set out in a way which is comprehensible and so that consumers can understand their practical significance. Terms which are transparent are more likely to satisfy the fairness test.
If a term has more than one definition, it will be given the meaning that is more favourable to the consumer.
The Consumer Rights Act under Schedule 2 provides an non-exhaustive list and what terms may be regarded as unfair.
Cancellation Rights
The specific enquiry from the consumer in the scenario we posed related to cancellation rights.
You should consider terms within your standard terms and conditions which enable both parties to bring the contract to an end. The advantage of covering this within the terms and conditions is that you can then set out the steps to follow to terminate the contract.
You will not be able to insert a provision where only the trader has the right to terminate the contract and you will not be able to penalise a consumer who seeks to cancel the contract.
Terms which give the parties the right to cancel are more likely to be fair if:
- where you cancel and the consumer is not at fault, you provide for full return of all advance payments;
- it applies only where circumstances genuinely beyond your control make it impossible to carry out the contract e.g. bad weather…these should be specified.
The implied terms in the consumer protection laws will in some circumstances give the consumer the right to end the contract.
For example where:
- they purchased at a distance and have a 14 day right to cancel;
- goods are delivered defective, misdescribed or late;
- services are not carried out with reasonable care and skill;
- where the consumer has been misled or subject to an aggressive sales practice.
A consumer can cancel the contract if you are in breach of its terms.
If the consumer does not have the right to cancel for any of the reasons set out above, but calls the event off and seeks to unwind the contract, whilst the consumer would otherwise have been bound by its terms, the supplier must still treat them fairly.
Deposits are also relevant in the context of cancellations and provide another example of how terms might be considered fair, or not. For consumers these are a means of reserving goods and services; for traders they are a way of protecting business from actual losses incurred.
If the consumer cancels and you are not at fault, you have the right to protect yourself in respect of losses not penalty and you can only seek to recover losses that were actually incurred. Terms that seek to keep costs and gross profits could be unfair if you get compensated for the same loss twice. Similarly, a disproportionate cancellation charge is likely to be unfair.
Having clear and fair terms will:
Save time;
Help prevent disputes;
Protect both parties if something goes wrong.
How can I ensure my terms are fair? - Tips for traders
- Clearly and prominently state the price to enable the consumer to make comparisons with other traders
- Putting key facts in bold upfront, for example relating to delivery and product specifications
- Group certain terms under key headings to ensure they are accessible and easy to navigate
- Reduce the length and complexity of terms and conditions and encourage customers to read these
- Ensure terms relating to delivery, accessibility, product specification and care instructions are clearly highlighted to the consumer, this can be provided prior to the purchase.
The Ombudsman can review your terms and conditions to give you some advice as to whether we consider these constitute a potentially unfair term. However, ultimately the jurisdiction would lie with a court on a case by case basis and remember, any uncertainty will always be construed in favour of a consumer. It is also worth bearing in mind that with the emphasis in the Consumer Rights Act 2015 being on consumers having greater access to their rights, it is even more important that not only are terms fair and reasonable, but also that they are clear and easy for a consumer to understand.
For more information, visit www.ombuds.group.
