The Consumer Rights Act 2015: Unfair Contract Terms

Amanda J WilliamsAmanda J Williams has kindly agreed to trawl through the new Consumer Rights Act 2015 which came into effect this month and translate it into bite sized chunks explaining how it will impact your business.

Amanda is Senior Legal Counsel at Business Law Online, who offer services at an hourly rate of just £135 plus VAT, but they also offer fixed price legal services taking into consideration every legal situation a business may encounter. Their fixed price contract includes legal advice and services, guidance, document preparation, review and more. Their services could include redrafting your Terms and Conditions of sale to take into account the new Consumer Rights.

Today Amanda looks at Unfair Contract Terms in the Consumer Rights Act:

Unfair Contract Terms

The Consumer Rights Act came into force on 01 October 2015 and only applies to items bought AFTER 1st October 2015.
This new act replaces three key pieces of former legislation – the Sale of Goods Act, Unfair Terms in Consumer Contracts Regulations and the Supply of Goods and Services Act.

The section of the new Act that replaces the Unfair Terms in Consumer Contracts Regulations now introduces a test of ‘fairness’ around key terms in a contract including the price, excessive early termination charges, clauses that limit your legal rights and disproportionate default charges and makes it easier to object to hidden fees and charges. Under the Act a term may only be excluded from an assessment for fairness where it is both transparent and prominent. A term is transparent where it is expressed in plain and intelligible language and (when written) is legible. The prominence of the term will be determined by how it was brought to the consumer’s attention (in such a way that the average consumer would be aware of it).

Under the previous legislation provided the contract was written in plain English there was no additional challenge, however under the new Act a term is deemed to be unfair ‘if, contrary to the requirement of good faith, it causes a significant imbalance, in the parties’ rights and obligations under the contract to the detriment of the consumer’. The Act also states that some terms in consumer contracts and consumer notices are automatically unenforceable and are referred to as ‘blacklisted’. An example of a ‘blacklisted’ term is that a trader cannot exclude or restrict liability for death or personal injury resulting from its negligence.

If you think a contract term is unfair, you should raise the issue directly with the trader. If the trader doesn’t agree, then you should seek legal advice. Depending on the details of your case you could take the trader to court and the court will decide whether a term is unfair. If the court decides that a term is unfair you may be able to ignore the term or even cancel your contract without having to pay a cancellation fee. Retailers who don’t abide by these new rules could face prosecution.

Example 1

You sign up to a mobile phone contract with a mobile dealer for £20 a month. After you agree to the deal you discover your next-door neighbour has got the same package for £15. You challenge your dealer, arguing that their deal is unfair.

The monthly price and the texts and minutes available were clearly explained, in plain English, when the contract was agreed and were prominent and transparent in the contract. Under the Act, it is easier for the dealer to understand what should not be left to the ‘small print’. In this case, you would not be able to challenge the deal for fairness, as the terms were transparent and prominent.

Example 2

You purchase an airline ticket and see a phrase on the last booking screen that “extra fees may apply”. You tick the box next to it and book your ticket. But when you arrive at the airport you find that you have to pay an excess baggage fee.

Because the amount of the fee was not brought to your attention when you booked, it was not sufficiently transparent and prominent, therefore under the terms of the Act it can be challenged for fairness.