IP, Technology & Data

The Office of Fair Trading (OFT) has launched a new unfair contract terms hub to provide businesses with guidance on when consumer contract terms might be ruled unlawful.

Unfair Consumer Contract Terms
Under consumer protection legislation, certain terms in a consumer contract may be struck out if they are considered unfair. The rules are set out in the Unfair Terms in Consumer Contracts Regulations 1999. The regulations are designed to protect consumers against overly one-sided contracts, which contain terms that are unfair, or that they may not understand, never mind be able to negotiate.

The 1999 Regulations are currently being reviewed by the Law Commissions.

Whilst rules governing the fairness of consumer contract terms have been around for many years, in recent years a number of businesses have found themselves in breach of the law. Notable examples include things like gym memberships and contracts for telephone services that automatically renew, or have very restrictive rights to terminate.

Are lengthy consumer contracts unfair?
Of particular concern (in the media at least) is the often lengthy terms and conditions that apply to the use of social media sites and Web 2.0 services such as eBay and Amazon, with frequent comparisons to the length of terms and conditions compared to the works of Shakespeare.

My own view on the length of these terms is that it is usually justified – after all, these sites deal with millions of pounds of transactions, that often need to address complex liability issues (for example, the payment services provided by PayPal).

I doubt that many people have read the entire criminal or civil law which governs their day to day life, but that doesn’t mean that they are not subject to it or don’t know how to behave. Many of the provisions in such contracts (particularly terms of use for online services) are fairly unsurprising when you read them. As with every day life, using common sense is likely to mean that you comply with the rules.

The key issue for consumers is understanding those terms that are unusual or potentially onerous, and which (if not brought to the consumer’s attention) could be unreasonable or unfair.

Contract terms hub
Against this backdrop, the OFT’s new website is helpful. The new hub is designed to help businesses navigate their way through the rules on unfair contract terms.

The website contains checklists and guidance in both summary and detailed format, together with specific guidance for certain industry sectors. It’s well worth consulting if you trade with consumers and haven’t reviewed your terms in a while.

Remember – if a term is held to be unfair then the court will strike it out of the contract. They won’t replace it with a clause that is reasonable. If that clause deals with something like a cap on liability then the business will end up with no cap on its liability under the contract.

If you would like Brodies to assist with a review of your consumer contracts then get in touch.

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