Consumer Rights Act day—how does it apply to unfair terms?

On 1 October every year a flutter of new laws cascades onto the desks of lawyers throughout the land: a harvest of obligations, repeals, transitional provisions and, if truth be told, sentences so long they can be seen from near space.

Hours are spent trying to digest how to progress from the ancien régime to the brave new legal world.

shutterstock_56919703

This year is no exception.

Today sees the coming into force of the Consumer Rights Act 2015. It heralds the biggest change to consumer law in a generation.

All this week we have been looking at how this new law applies to digital content:

https://twitter.com/LexisUK_Comml/status/649137671135174656

Services:

https://twitter.com/LexisUK_Comml/status/648791798761029632

And goods:

https://twitter.com/LexisUK_Comml/status/648519372672208896

Today, we're going to have a quick look at what the Consumer Rights Act has to say on unfair terms in consumer contracts.

The big 'takeaway message' for any business is that an unfair term in a consumer contract is not binding on the consumer. A company can write whatever it likes in its 'small print' with consumers, but if it offends the sensibilities of this law—easily done—it is simply wasting toner ink or shouting into the wind. And, in fairness, nobody likes to do that.

What's more, from today, the law extends to consumer notices. From plaques on a wall to the backs of tickets, these will not be binding on a consumer if they are unfair, although, consumers can decide to rely on an unfair term or notice if they are so minded.

So what is an unfair term?

A term or notice 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 consumer's detriment.

Fairness is determined taking into account:

  • the nature of the subject matter of the contract or notice
  • all the circumstances existing when the term was agreed to, and
  • all of the other terms of the contract or any other contract on which it depends

Significant imbalance is concerned with the parties' rights and obligations under the contract. The requirement is met if a term is so weighted in favour of a business that it tilts the rights and obligations under the contract significantly in its favour, for instance, granting the trader undue discretion or imposing a disadvantageous burden on the consumer.

And here's a 'biggy': to be unfair, an imbalance must be practically significant, but there does not need to be proof that a term has caused actual harm.

Are there any exclusions?

Yes. The Act says that a term cannot be assessed for fairness to the extent that:

  • it specifies the main subject matter of the contract, or
  • the assessment is of the appropriateness of the price payable under the contract by comparison with the goods, digital content or services supplied under it

However, such a term must be transparent and prominent.

And what's the blacklist?

The Act makes certain blacklisted contract terms and notices legally ineffective—ie, they not binding on, or enforceable against, consumers.

Therefore a trader cannot, for example, exclude the implied term that the goods it is selling are of satisfactory quality.

For a comprehensive list of blacklisted terms, check out the Competition and Market Authority's blacklist starting at page 38 of this guidance: CMA37.

Terms and notices can also be ineffective and unenforceable if they are found to be unfair by reference to the general fairness test in Part 2 of the Act. This is the so-called 'grey list' (see page 64 onwards of the 'CMA37' guidance):

grey list

(© Crown copyright 2015. Reproduced under the under the terms of the Open Government Licence.)

So that's it for now.

The day has finally arrived.

The future is here. Now.

The Sale of Goods Act 1979 is dead*. Long live the Consumer Rights Act 2015!

So how have you got on? Are all your T&Cs are fresh off the press and ready to go? Or are you struggling to get your head around the new law? Do let us have your thoughts below.

*Well, it is for consumers. Business to business (B2B) contracts will continue to be regulated by it.

shutterstock_149620133

Area of Interest