Unfair terms in consumer contracts
Consumers have legislative protection from unfair terms in consumer contracts. An unfair term in a standard consumer contract is a term that is significantly weighted against the consumer. In other words, the contract contains a statement that puts the consumer at a disadvantage. A supplier of goods or services can have an advantage over the consumer by including such an unfair term in a contract.
Under The European Communities (Unfair Terms in Consumer Contracts) Regulations, (SI 27/1995) however, consumer contracts are open to a test of fairness. Any term found by a Court to be unfair, is ineffective. SI 27/1995 was amended by SI 307/2000 and SI 160/2013.
The Competition and Consumer Protection Commission has supervisory powers to ensure compliance with the legislation. In certain circumstances, the CCPC may seek a court order preventing the use of contract terms that are considered to be unfair. The CCPC publishes a detailed guide to unfair terms and conditions in consumer contracts.
What are terms in a consumer contract?
A contract is an agreement between 2 or more people that is enforceable by law. When you buy goods or services you enter into a contract with the supplier of goods and services. This is called a consumer contract. Specifically a consumer is a person who is buying a service or a product from someone whose normal business it is to sell that product or service.
Contracts may be written or oral. It is easier to know precisely what the terms are in a written contract but an oral contract is also enforceable in law. Consumer contracts may differ and there are no hard and fast rules governing what terms should be in a consumer contract.
Contracts are made up of terms and there are different types of terms in consumer contracts. Implied terms are not mentioned in a written or oral consumer contract but exist all the same. An example of an implied term might be that the product or service will last for a reasonable length of time taking the cost of the item or service into account. Mandatory terms are terms that by law have to be included in contracts – these are not common in consumer contracts. Core terms are terms that set out the main conditions of a contract. In a consumer contract, these core terms might include the price of the product or service. Neither core terms nor mandatory terms are covered by the EU Unfair Terms in Consumer Contracts Regulation 1995.
These regulations take into account the circumstances surrounding the conclusion of the contract: for example, whether the product or service was sold to the consumer in a fair and equitable manner.
The regulations do not however, apply to any term that has been individually negotiated in a contract between a consumer and a supplier of goods and services. They also do not cover contracts between individuals selling products or services outside the course of their normal business or between one trader and another. Other contracts relating to employment, succession rights, family law or the formation of companies or partnerships are not covered by the regulations.
What is meant by an unfair term?
As explained above, an unfair term in a consumer contract is a term that can cause a significant imbalance in the parties’ rights and obligations to the detriment of the consumer. There are 3 main categories that unfair terms may fall into:
- Terms that give the supplier of goods or services the right to change the terms of the contract.
- Terms that limit the liability of the supplier of goods and services: for example no liability for death or personal injury arising out of an act or an omission by the supplier of goods or services.
- Terms that put an unfair burden on the consumer: for example a contract with a term stating that a deposit will be kept by the supplier of goods or services if the consumer cancels the contract but does not include a term saying that the supplier of goods or services will pay compensation if it does not fulfil its commitments.
This list is not exhaustive. Terms that fit into one of the above categories may be fair, and equally, a term may be deemed to be unfair which does not fit into one of the above categories.
Unfair terms violate the principle of good faith. If you enter a contract in good faith it means that your intentions are honest. The principle of good faith could be violated by, for example, inserting a term in the small print of the contract agreement where the consumer cannot see it easily.
In the case of written contracts, all terms must be written in plain, understandable language. If there is a doubt about the meaning of a term, the meaning that is most favourable to the consumer will prevail. If a term in the contract is found to be unfair, the remainder of the contract may still be legally binding on the consumer and the supplier of goods or services. This means that while one term or condition of the contract may be illegal, the remainder of the contract remains in force.
How to apply
Complaints about unfair terms in consumer contracts should be made to the Competition and Consumer Protection Commission (CCPC).
Normally an unfair term in a consumer contract will only come to light if a
problem arises between a consumer and a supplier of goods and services. If you
feel that a term in a contract is unfair you should bring it to the attention
of the Competition and Consumer Protection Commission (CCPC).
Where to apply