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How to give your customer fair terms – a guide to the Consumer Rights Act 2015

You may remember my colleague Angus’ blog on the Consumer Rights Act 2015. Excitingly (erm) there is some new, helpful guidance on that.

The guidance aims to explain what are (i) automatically unfair terms (referred to as “black listed” terms); and (ii) terms which may be unfair depending upon the context (“grey listed”). These tests will be applied whether the term in question has been individually negotiated or is part of a standard form.

Unfair terms are unenforceable. The Act states that a term is unfair when it causes a “significant imbalance in the parties’ rights and obligations…to the detriment of the consumer”. But what does this mean in practice?

You need to ensure that your terms and conditions are:

  1. Transparent: use clear and intelligible language. Set out what the practical significance of particular rights and obligations are for the consumer.
  2. Balanced: any signs of undue discretion in favour of the trader or an unusual or onerous burden on the consumer will put the regulator/court on alert of unfairness. Would both parties actually use or enforce the right or be likely to have to fulfil the obligation? For example, are penalties applied to both parties for termination?
  3. Not value-centric: low cost goods or services do not make other terms automatically fair that would otherwise be at risk of challenge.
  4. Not “unpicking” the existing law: if your terms are substantially altering the law as it would otherwise stand (e.g. data protection duties) then this is most at risk of enforcement action.
  5. Not unduly constraining the consumers’ legal remedies: if you are providing an additional safeguard against the potential detriment to the consumer then make sure this is clear to the consumer. If it is hidden in small print this may not be taken into account for the fairness test.
  6. Giving proportionate remedies to the trader, not penalties to the consumer.
  7. Taking account of the consumers’ interests and not taking advantage of their circumstances: that is to say you have to do more than simply avoid bad behaviour because of the consumers’ urgent need to contract.

It is also good practice to provide the consumer with ample time (or assistance, if required) to read the terms of the contract fully. Consumers rarely take the time to read standard contracts in full. However, a trader should not consider that they simply do so at their own risk. Failure to understand the terms could impact on your enforcement rights.

The consequences for a trader of including terms which may be seen to be unfair (or unclear) are numerous. A disgruntled consumer may request an investigation into the matter by an appropriate regulator (such as the Competition and Markets Authority or a Trading Standards agency). Alternatively, they may choose to raise their own civil court proceedings to declare the term unenforceable. All could have serious consequences for your business, in terms of cost and reputation.

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