Terms in consumer contracts are not enforceable if they are deemed “unfair” under regulations in force since 1995. The OFT has amassed know-how on what clauses will fail the test and shares this in new proposed revised Guidance just published. Stephen Groom reports.
Topic: Contract
Who: Office of Fair Trading
Where: London
When: April 2007
What happened:
The Office of Fair Trading (“OFT”) published a consultation on proposed “revised Guidance for the Unfair Terms in Consumer Contracts Regulations 1999.”
The online environment makes it tempting to use cut and paste terms and conditions for all kinds of B2C contracts (e.g. sales, subscriptions, promotions with prizes, rental, site registration) but consumer contract terms that are drafted without taking account of the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCR”) can be bad news for B2C businesses.
“Unfair” term consequences
A complaint by a customer or competitor may lead to a full and publicised OFT review, action by trading standards or by other “qualifying bodies” such as Which? and demands that terms are deleted or changed. Also, if a business tries to enforce “unfair” terms the court will likely refuse to enforce them if the consumer is well advised.
This OFT initiative revises guidance published in 2002 and gives further insights into the types of clause that are commonly run off the processor but may cause problems.
Eighteen contract types analysed
The guidance offers the OFT view on the right and wrong approach to terms split into no less than 18 groups such as “Exclusion and limitation clauses,” “Supplier’s rights to vary terms generally” and “Plain and intelligible language.” It also annexes useful examples of terms that are highly likely to fail the fairness test.
Here we will cherry pick but although chunky at over 170 pages, a read through of the original is strongly recommended.
In the “Restricting the consumer’s remedies” Group 17 the OFT advises that compulsory arbitration clauses will be regarded as unfair, whilst clauses will not be acceptable if they try to prevent the consumer from starting legal proceedings against the business in their local courts.
“Statutory rights unaffected” effective?
In the “Exclusion and limitation” clauses Groups 1 and 2, the OFT condemns clauses that say “every effort” will be made to honour agreed deadlines, yet still exclude liability for delay. Also, a limitation clause cannot be made acceptable by adding general and semi contradictory wording to the effect that a consumer’s statutory rights are not affected.
In the “Supplier’s discretion in relation to obligations” Group 18 the OFT takes a dim view of clauses giving a supplier complete freedom to make arrangements for carrying out services or delivery of goods.
In the “Plain and intelligible language” Group 19 there is criticism of terms such as “indemnity. There is also advice that apart from avoiding use of technical vocabulary, businesses should ensure that sentences are short and the text of terms broken up with easily understood subheadings. Statutory references, elaborate definitions and extensive cross-referencing should be avoided.
Annex gives good and bad clause examples
In the annex are examples of good and bad clauses, split up into the same Groups as the main Guidance.
Egregious clauses include:
“I have read the Conditions of sale overleaf and agree to be bound by them.”
“Any dispute arising out of this agreement shall be subject to the jurisdiction of the High Court of Justice or the County Court local to [the supplier] or the Central Office of the High Court of Justice at the option of [the supplier]”
“I hereby waive my rights under the Data Protection Act”
“The company reserves the right to vary design and/or specification of any installation and/or product used without prior notice to the customer”
“In the event of death we would expect the resident’s bedroom to be cleared within 48 hours and the home reserves the right to withhold prepaid fees or charge for a period of 4 weeks.”
Why this matters:
It is twelve years since general “unfair” consumer contract term controls were introduced in the UK, yet B2C businesses still persist in use of often recycled, one sided and indefensible standard terms.
With other “Qualifying bodies” such as the Consumers’ Association now having powers to enforce these regulations, the publication of this proposed revised Guidance is a timely reminder of the importance of careful drafting of consumer contract terms. Time perhaps for an audit before “Which?” comes knocking on the door.
Stephen Groom
Head of Marketing and Privacy Law
Osborne Clarke London
stephen.groom@osborneclarke.com
