Top Ten Unfair Contract Terms
1st September, 2015
Amy Tindall, Senior Commercial Solicitor
This is the third in our series of updates about the Consumer Rights Act, which comes into force on 1st October 2015. So far we’ve given you an overview of the new law and a “heads up” on the possible penalties for breaching it. Here, Amy Tindall, senior commercial solicitor, gives an overview of what the new law says about unfair contract terms and gives businesses a top ten list of potentially unfair contract terms.
Terms that may be considered unfair:
The Act affects businesses entering contracts with consumers and applies to both contract terms and consumer notices. It protects the consumer against contractual wording that could be used to give businesses an unfair advantage. Businesses should ensure their contractual wording is:
• fair – not weighted unfairly against the consumer, or hidden away; and
• transparent (if written) – enabling consumers to make informed choices, by using clear, prominent, jargon-free language that consumers can understand.
If your terms are unfair under the Act, you could find that they are not legally binding on consumers, and you could face enforcement action if they fail either the fairness or transparency tests.
The Act blacklists certain terms, making them unenforceable in all circumstances, without any need to assess them for fairness.
It also greylists some terms which may be considered unfair. Here are some examples of potentially unfair terms, so have a think about whether your contracts include any of them:
Exclusions or limits on liability – excluding or restricting your liability for death or personal injury (these terms are blacklisted as well as being unfair); excluding liability for your business’ delay; placing unreasonable time limitations on consumer claims;
Non-returnable prepayments – making pre-payments entirely non-refundable even where there is no fault by the customer and you end the contract;
Disproportionate sanctions – imposing unreasonable interest rates on outstanding payments; misleading consumers into thinking they are required to pay more compensation than is required by law; imposing a disproportionate cancellation charge if consumers decide to pull out of a contract early;
Unfair cancellation – cancelling a contract without notice; including disproportionately high termination charges and long notice periods;
Binding consumers to hidden terms – consumers should always have a real opportunity to read and understand all contract terms before they are bound by them; if not then terms can be considered unfair;
Unilateral variation clauses – terms allowing a business to vary a contract regardless of the consent of the other party. Any variation should be notified to consumers, agreed by both parties and if not agreed the consumer should be given a termination right;
Right of final decision – the consumer could be at a disadvantage when a term gives the business the right to decide how the contract is interpreted or whether any breach has occurred;
Denying liability for statements made by agents or employees – it is likely to be unfair to seek to exclude liability for statements that have been made on behalf of the business by its employees or sales agents. Businesses should ensure their employees and sales agents understand their terms and bring them to the attention of consumers as part of the negotiation process.
Unbalanced assignment clauses – transferring the agreement to another party without the consumer’s consent;
Hindering or preventing consumers from taking legal action – if you try to remove or hinder the consumer’s right of redress when you are in default, the contract term may be blacklisted as well as being found to be unfair.
If you’re worried about your contracts including these provisions and you’d like to discuss them in more detail please contact Amy Tindall, Senior Commercial Solicitor at Genus Law or call 0113 320 4540.