OFT In its recent, updated “Unfair contract terms guidance”, the OFT underlines that businesses using unfair B2C contract terms that are unenforceable under the Unfair Terms in Consumer Contract Regulations 1999 might now be also committing a criminal offence under recently in force “Unfair commercial Practice” regulations. Mark Smith reports.
Topic: Consumer Protection
Who: Office of Fair Trading
When: September 2008
Where: UK
Law stated as at: 25 September 2008
What happened:
The Office of Fair Trading (“OFT”) has published updated Guidance (“Guidance”) on the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCRs”).
The UTCCRs apply to all standard form business to consumer contracts, such as, in a marketing context, prize promotion rules. They provide that any clause in such contracts that is “unfair” as defined will not be enforceable.
From time to time the OFT publishes Guidance on how to craft B2C contract clauses so as to ensure they will not fall foul of the UTCCRs.
The Guidance is helpfully split up into different categories of clause such as “Exclusion of liability for failure to perform contractual obligations” and “Transferring inappropriate risks to consumers.” A separate set of Annexes gives examples of clauses that do and don’t work in each category.
The latest iteration of the Guidance takes into account the recent coming into force of another important consumer protection measure, the Consumer Protection from Unfair Trading Regulations 2008 (“CPRs”).
“Advertisers become criminals” impact of new Regulations
The CPRs came into force on 26 May 2008. They introduced a general duty not to trade unfairly and made a broad range of “unfair commercial practices” criminal offences.
The CPRs are wide-ranging and as this sinks in, more ways in which they might make criminals out of advertisers become apparent.
An example of this is the Guidance.
This makes it clear that clauses in a standard form B2C contract that are “unfair” not only run the risk of being unenforceable under the UTCCRs, they also put their owners at risk of criminal prosecution. Why?
Because the very act of including such a clause in small print may be held to be an “unfair commercial practice” under the CPRs.
Examples of where unfair clauses will be unfair commercial practices
Take for example the use in a contract for the sale of goods of a term either restricting or excluding consumers’ statutory rights. This is always ineffective in law regardless of its fairness. However, use of such terms may now also give rise to enforcement action as a misleading commercial practice under the CPRs.
Similarly, guarantees which offer consumers more limited rights than are available under the law, for instance because the benefits are less or their availability is made subject to special conditions, would not only be unenforceable under the UTCCRs. They would also likely expose the trader responsible to enforcement action under the CPRs as an “unfair commercial practice.”
In a related context, although CPRs have repealed the main legislation requiring the use of statements that consumers’ statutory rights are unaffected where certain offers are made, the Guidance makes it clear that consumer guarantees in sale of goods contracts still have to contain a statement that the consumer has statutory rights which are unaffected by the guarantee.
Finally, the Guidance points out that under the UTCCRs any term which could have the effect of depriving consumers of protection normally given to them under the law is open to suspicion of unfairness and hence potential enforcement action under the CPRs. A relevant example of this is in a mail order context, where the CPRs make it clear that it will be an “always unfair” commercial practice and a criminal offence to seek to impose on consumers an obligation to pay for goods they have not asked to receive.
Why this matters:
The OFT has of late been increasingly active in policing “unfair” business to consumer terms under the UTCCRs. Now the Guidance has highlighted another risk traders could run by cutting and pasting clauses into standard consumer facing terms and conditions without giving them proper thought.
It is also worth remembering that those in breach of the CPRs may be guilty of criminal offences, most of which are strict liability. Officers of corporate bodies can be prosecuted, as well as the corporate bodies themselves, and the penalties are, on summary conviction, a fine of up to £5000 and on indictment, a fine or imprisonment not exceeding two years, or both. This new dimension of risk should certainly help focus the minds of those working in businesses dealing with consumer contracts!
Note that the full guidance can be found online at:
http://www.oft.gov.uk/advice_and_resources/publications/guidance/unfair-terms-consumer/oft311
