Policy
Unfair Terms in Consumer Contracts
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The Unfair Terms in Consumer Contracts Regulations 1999 are designed to ensure that standard form contracts entered into by consumers have contractual terms that are fair and expressed in clear, intelligible language. An unfair term is not binding on the consumer.
A contractual term may be unfair if it tilts the rights and obligations of the parties significantly in favour of the supplier and was not entered into by the supplier in good faith. This may be the case if contractual terms were not expressed fully, clearly and legibly, or contained concealed pitfalls or traps. Appropriate prominence should be given to terms that might operate disadvantageously to the customer.
The terms are assessed as to whether they are unfair when the contract is concluded. The assessment will not normally look at the goods or services that are the subject of the contract, nor will it ordinarily look at the adequacy of the price.
A number of organisations including Which?, the FSA and the OFT have the power to take certain actions on unfair terms. For example, they can seek to prevent the continued use of an unfair term.
In 2005 the FSA published a Statement of Good Practice regarding unfair terms covering building societies' contract terms and conditions, for example in relation to savings and banking products. The statement does not constitute FSA formal Rules or Guidance. The BSA welcomed the publication of this statement of good practice.
The Unfair Commercial Practices Directive differs from the Unfair Terms in Consumer Contracts Regulations as it prohibits unfair practices by businesses against consumers, but not unfair contractual terms. The Unfair Commercial Practices Directive is expected to become UK law on 26 May 2008, and together with the Unfair Terms in Consumer Contracts Regulations, will provide protection for consumers in relation to both unfair terms and unfair practices.
