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Unfair terms in contracts

You may think that once you've signed a contract, it's legally binding, no matter what. But if the terms in the contract are judged to be unfair, you may not be bound by them.

Unfair Terms in Consumer Contracts Regulations (UTCCRs)

As a consumer, you are protected against unfair standard terms in contracts you make with traders by the Unfair Terms in Consumer Contracts Regulations (UTCCRs).

The UTCCRs can protect you from terms that reduce your statutory or common law rights and from terms that seek to impose unfair burdens on you over and above the ordinary rules of law.

An unfair term in a contract covered by the UTCCRs is not binding on you.

Unfair terms in contracts - what is an unfair term?

An unfair term in a contract covered by the Unfair Terms in Consumer Contract Regulations (UTCCRs) is not binding on you.

Test of fairness

A term is 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 consumers.

 'Good faith' means that traders must deal fairly and openly with you.

Although standard terms may be drafted to protect commercial needs, they must also take account of your interests and rights by going no further than is necessary to protect those legitimate commercial interests.

The plain language requirement

According to the UTCCRs, a standard term must be expressed in plain and intelligible language. A term is open to challenge if it could put you at a disadvantage because you are not clear about its meaning - even if its meaning could be worked out by a lawyer. If there is doubt as to what a term means, the meaning most favourable to the consumer will apply.

What terms are not covered?

Most standard terms are covered by the UTCCRs. The exceptions are those:

  • That reflect provisions which by law have to be included in contracts
  • That have been individually negotiated
  • In contracts between businesses
  • In contracts between private individuals
  • In certain contracts that people do not make as consumers - e.g. relating to employment or setting up a business
  • In contracts entered into before 1995.

Terms setting the price or defining the product or service

Terms in consumer contracts that set the price or define the product or service being supplied are 'core terms' of the contract and are exempt from the test of fairness as long as they meet the plain language requirement.

Guidance

The OFT produces guidance on unfair terms in consumer contracts aimed at both consumers and businesses.

 

This content is subject to Crown Copyright

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