PART 2Unfair terms
What are the general rules about fairness of contract terms and notices?
I162Requirement for contract terms and notices to be fair
1
An unfair term of a consumer contract is not binding on the consumer.
2
An unfair consumer notice is not binding on the consumer.
3
This does not prevent the consumer from relying on the term or notice if the consumer chooses to do so.
4
A term 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 detriment of the consumer.
5
Whether a term is fair is to be determined—
a
taking into account the nature of the subject matter of the contract, and
b
by reference to all the circumstances existing when the term was agreed and to all of the other terms of the contract or of any other contract on which it depends.
6
A notice is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations to the detriment of the consumer.
7
Whether a notice is fair is to be determined—
a
taking into account the nature of the subject matter of the notice, and
b
by reference to all the circumstances existing when the rights or obligations to which it relates arose and to the terms of any contract on which it depends.
8
This section does not affect the operation of—
a
section 31 (exclusion of liability: goods contracts),
b
section 47 (exclusion of liability: digital content contracts),
c
section 57 (exclusion of liability: services contracts), or
d
section 65 (exclusion of negligence liability).
I263Contract terms which may or must be regarded as unfair
1
Part 1 of Schedule 2 contains an indicative and non-exhaustive list of terms of consumer contracts that may be regarded as unfair for the purposes of this Part.
2
Part 1 of Schedule 2 is subject to Part 2 of that Schedule; but a term listed in Part 2 of that Schedule may nevertheless be assessed for fairness under section 62 unless section 64 or 73 applies to it.
3
The Secretary of State may by order made by statutory instrument amend Schedule 2 so as to add, modify or remove an entry in Part 1 or Part 2 of that Schedule.
4
An order under subsection (3) may contain transitional or transitory provision or savings.
5
No order may be made under subsection (3) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.
6
A term of a consumer contract must be regarded as unfair if it has the effect that the consumer bears the burden of proof with respect to compliance by a distance supplier or an intermediary with an obligation under any enactment or rule implementing the Distance Marketing Directive.
7
In subsection (6)—
“the Distance Marketing Directive” means Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC;
“distance supplier” means—
- a
a supplier under a distance contract within the meaning of the Financial Services (Distance Marketing) Regulations 2004 (SI 2004/2095), or
- b
a supplier of unsolicited financial services within the meaning of regulation 15 of those regulations;
- a
“enactment” includes an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978;
“intermediary” has the same meaning as in the Financial Services (Distance Marketing) Regulations 2004;
“rule” means a rule made by the Financial Conduct Authority or the Prudential Regulation Authority under the Financial Services and Markets Act 2000 or by a designated professional body within the meaning of section 326(2) of that Act.
I364Exclusion from assessment of fairness
1
A term of a consumer contract may not be assessed for fairness under section 62 to the extent that—
a
it specifies the main subject matter of the contract, or
b
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.
2
Subsection (1) excludes a term from an assessment under section 62 only if it is transparent and prominent.
3
A term is transparent for the purposes of this Part if it is expressed in plain and intelligible language and (in the case of a written term) is legible.
4
A term is prominent for the purposes of this section if it is brought to the consumer's attention in such a way that an average consumer would be aware of the term.
5
In subsection (4) “average consumer” means a consumer who is reasonably well-informed, observant and circumspect.
6
This section does not apply to a term of a contract listed in Part 1 of Schedule 2.
I465Bar on exclusion or restriction of negligence liability
1
A trader cannot by a term of a consumer contract or by a consumer notice exclude or restrict liability for death or personal injury resulting from negligence.
2
Where a term of a consumer contract, or a consumer notice, purports to exclude or restrict a trader's liability for negligence, a person is not to be taken to have voluntarily accepted any risk merely because the person agreed to or knew about the term or notice.
3
In this section “personal injury” includes any disease and any impairment of physical or mental condition.
4
In this section “negligence” means the breach of—
a
any obligation to take reasonable care or exercise reasonable skill in the performance of a contract where the obligation arises from an express or implied term of the contract,
b
a common law duty to take reasonable care or exercise reasonable skill,
c
the common duty of care imposed by the Occupiers' Liability Act 1957 or the Occupiers' Liability Act (Northern Ireland) 1957, or
d
the duty of reasonable care imposed by section 2(1) of the Occupiers' Liability (Scotland) Act 1960.
5
It is immaterial for the purposes of subsection (4)—
a
whether a breach of duty or obligation was inadvertent or intentional, or
b
whether liability for it arises directly or vicariously.
6
This section is subject to section 66 (which makes provision about the scope of this section).
I566Scope of section 65
1
Section 65 does not apply to—
a
any contract so far as it is a contract of insurance, including a contract to pay an annuity on human life, or
b
any contract so far as it relates to the creation or transfer of an interest in land.
2
Section 65 does not affect the validity of any discharge or indemnity given by a person in consideration of the receipt by that person of compensation in settlement of any claim the person has.
3
Section 65 does not—
a
apply to liability which is excluded or discharged as mentioned in section 4(2)(a) (exception to liability to pay damages to relatives) of the Damages (Scotland) Act 2011, or
b
affect the operation of section 5 (discharge of liability to pay damages: exception for mesothelioma) of that Act.
4
Section 65 does not apply to the liability of an occupier of premises to a person who obtains access to the premises for recreational purposes if—
a
the person suffers loss or damage because of the dangerous state of the premises, and
b
allowing the person access for those purposes is not within the purposes of the occupier's trade, business, craft or profession.
I667Effect of an unfair term on the rest of a contract
Where a term of a consumer contract is not binding on the consumer as a result of this Part, the contract continues, so far as practicable, to have effect in every other respect.
I768Requirement for transparency
1
A trader must ensure that a written term of a consumer contract, or a consumer notice in writing, is transparent.
2
A consumer notice is transparent for the purposes of subsection (1) if it is expressed in plain and intelligible language and it is legible.
I869Contract terms that may have different meanings
1
If a term in a consumer contract, or a consumer notice, could have different meanings, the meaning that is most favourable to the consumer is to prevail.
2
Subsection (1) does not apply to the construction of a term or a notice in proceedings on an application for an injunction or interdict under paragraph 3 of Schedule 3.