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Are your Ts&Cs with consumers “fair”?
The Competition and Markets Authority (CMA) has published a series of at-a-glance guides that provide an introduction on the types of terms and notices that may be unfair.
What is a "term"?
A term is often set out in Terms and Conditions of Business, but it can be any written term in a catalogue, brochure or on a website or email. It also does not need to be written – terms can be spoken, including over the phone or face-to-face.
Unfair terms are not binding on consumers. Consumers can challenge unfair terms in Court and the CMA and Trading Standards can also bring cases to stop its use.
What is unfair?
Broadly, a term is unfair if it causes a significant imbalance in the parties' rights and obligations under the contract, to the detriment of the consumer.
In addition, the wording (if written) needs to be transparent and prominent, which means that language must be readable, clear and jargon-free. Terms must be brought to the consumers attention in a practically effective way (so that they can see and understand all terms that could operate to their disadvantage) before the contract is entered into. Terms that are not transparent or prominent will be given the meaning that is most favourable to the consumer.
Some terms are blacklisted by law, and these are automatically unenforceable, with the need to consider the requirement for fairness. These include trying to exclude or restrict liability for death or personal injury resulting from negligence or those that try to relieve traders from providing products of satisfactory quality or services with reasonable skill and care.
Other unfair terms are those that are in the "Grey List" (Schedule 2 of the Consumer Rights Act 2015). These terms are not automatically considered unfair but they are not exhaustive. These terms are generally those that cause or allow:
- consumers being denied full redress if things go wrong;
- consumers being tied into the contract beyond what they would normally expect;
- the business not having to perform its obligations;
- consumers unreasonably losing prepayments if the contract is ended;
- the business arbitrarily varying terms after they have been agreed;
- the business determining the price or subject matter of the contract after the consumer has become bound by it;
- consumers being subject to disproportionate financial sanctions.
Examples of terms that may be considered unfair are those that include:
1. Excluding or limiting liability:
- excluding or limit the business' liability for its delay;
- excluding or limiting the businesses' liability for failing to perform its obligations (for example, "we reserve the right to suspend services without liability");
- reducing the amount of availability of consumer redress (for example "liability accepted up to the value of the goods only");
- placing unreasonable time limits on claims;
- excluding or limiting the consumer's right of set-off;
- excluding or limiting liability by giving guarantee rights that are narrower or weaker than the consumer's statutory rights (for example "we will repair or replace (at our option) any item found faulty within three months").
2. Non-returnable consumer prepayments, whatever the circumstances, particularly if there is no fault on the part of the consumer and the contract is ended by the business.
3. Disproportionate sanctions, for breach of contract by the consumer. This would include unreasonable rates of interest for late payments or a disproportionate cancellation charge if the consumer pulls out of a contract early, or enforcement methods that could involve the violation of the consumer's privacy or property rights.
4. Unfair cancellation/termination clauses, if these allow the business to cancel at its option with no redress to the consumer, particularly without notice (except on serious grounds) or wording that restricts the consumer's ability to cancel in some circumstances (for example, if the trader has seriously breached the contract). This may also include high termination charges or over-lining notice periods.
5. Binding consumer to hidden terms, or to wording of which they have no prior knowledge.
6. Variation clauses, if they could be used to force the consumer to accept increased costs, new requirements or reduced benefits.
7. Right of final decision by the business, without redress by the consumer.
8. Denying liability for statements made by agents or employees, and these may also be "blacklisted".
9. Unbalanced assignment clauses.
10. Hindering or preventing consumers from taking legal action, and these may also be "blacklisted", for example a requirement to refer disputes to an alternative dispute resolution process together with removing a consumer's right to take legal action before the Courts.
11. Allowing excessive burdens or requirements to be imposed on the consumer, particularly if these are financial, such as a right for a business to demand unspecified sums at the businesses discretion.
12. Requiring the consumer to bear inappropriate risks, such as indemnity clauses or terms that transfer a risk to the consumer when the business can insure against it.
13. Requiring the consumer to make disadvantageous declarations, such as a requirement for consumers to sign a declaration that states they have "read and understood the terms and conditions".
14. Exclusions and reservations of special rights, which tries to have the effect of overriding a consumer's legal rights (such as rights to cancel a contract for distance or off-premises contracts).
Fairness is assessed, taking into account:
- The nature of the subject matter of the contract;
- All the circumstances existing when the term was agreed;
- All the other terms of the contract.
The CMA guidance includes titles such as "Common myths about contract terms", "Top tips when writing your contract terms" and "Fair terms for your customers" and has individual guides on some of the topics outlined in 1 to 14 above. The guidance can be found here.
For further information, please contact me on 01733 888855 or email email@example.com.