When a dispute arises over a clause in a contract, it is easy for the party defending this clause to say ‘well, you should have read the contract’. But how many of us actually take the time to trawl through the small print when signing up to an agreement? Most of us will assume good faith, and rely on our statutory rights to protect us. However, complaints regarding minimum term clauses in mobile phone contracts and gym membership contracts, as well as the use of exclusion or indemnity clauses by unscrupulous firms is proof that this can be a false assumption.
Such contract terms may be found to be unfair, and hence legally unenforceable. For guidance on this, we refer to the Unfair Contract Terms Act 1977. In a nutshell, this piece of legislation protects consumers who enter into legally binding agreements with suppliers where the contract is biased in favour of the supplier. Unfair clauses are those which try to exclude any of the following:
- liability for negligence in the event of death or personal injury. Liability for loss or damage may be excluded, but only where it is considered reasonable.
- liability for breach of contract. This includes situations in which the supplier did not carry out their contractual obligations (the item was not as described or the service not carried out)
- Indemnity clauses are those which protect an individual or a supplier from legal action in the event of professional negligence
- Product guarantees designed to protect the consumer in case of damage of defect
- Statutory rights with regard to Sale of Goods and Supply of Goods and Services legislation.
- Misrepresentation in the form of false or inaccurate claims
The following are also taken into account when deciding whether a clause is ‘reasonable’ or not:
- The relative strengths of supplier and consumer and whether there is a significant imbalance
- Whether you were offered an inducement to agree to the term
- Whether the items purchased were produced or adapted to your particular requirements.
More recently introduced European Regulations clarify further definitions of what constitutes ‘unfair’.
- Making the arrangement legally binding on you, but not on the supplier.
- Allowing the supplier to retain money in the event that you cancel, but not obliging the supplier to pay compensation in the event that they cancel.
- The requirement for you to pay cancellation charges which are disproportionately high.
- Allowing the supplier to dissolve the contract on a discretionary basis, without giving you the same right.
- Allowing the supplier to cancel the contract without reasonable notice to you.
- Automatic contract renewals where you are not given reasonable opportunity to prevent the renewal.
- Incorporating legally binding contractual terms without giving you reasonable opportunity to become familiar with them before signing.
- Allowing the seller to alter the terms of the contract without a valid reason which is specified in the contract.
- Allowing the supplier to determine the price at the time of delivery, or significantly increasing the price without giving you the chance to cancel.
- Giving the supplier the right to determine whether the goods you receive are as described or allowing him to interpret contractual terms as he sees fit.
- Legally obliging you to fulfil your obligations, while not obliging the supplier to fulfil his.
- Allowing the seller to transfer his rights and obligations if it affects any product guarantees you may have with him.
- Not allowing or restricting your right to take legal action against him for negligence or breach of contract
For further information, see the regulations themselves:
- Unfair Terms in Consumer Contracts Regulations 1999
(External link to PDF)