CMA launches awareness campaign on unfair contract terms

03 November 2016

Author: Aisling O'Hare
Practice Area: Commercial Law

Aisling_o'hare

A recent report published by the Competition and Markets Authority (CMA) has revealed that more than half of the UK businesses surveyed do not fully understand the rules on 'unfair terms' in a contract, which has had a direct impact on how a business treats its customers.

Research for the CMA also revealed that some businesses think a signed contract is final, not realising that they cannot enforce a term against a consumer if it is unfair. Other businesses may copy terms from larger businesses or competitors, assuming incorrectly that these will be automatically fair and legally binding.

It was also found that 67% of UK businesses sell to consumers, with most having some form of terms and conditions in place; however 20% of businesses said they did not communicate any terms to their customers. The rules on using unfair terms are set down in the Consumer Rights Act 2015, with the research revealing that only 15% of those surveyed were familiar with this legislation.

 

In general, companies are free to use whatever contractual terms and conditions they consider to be reasonable, but these terms and conditions cannot be unfair. Unfair terms are those that give businesses an unfair advantage over consumers, often by reducing their rights or ability to complain if things go wrong. For example, they can include:

  • Keeping all of a customer’s deposit if they cancel, regardless of the amount the business is actually losing as a result;

  • Using excessively long notice periods that tie customers into a contract for a longer period of time than they want; or

  • Excluding the business’ liability for things that are its fault (i.e. delays, or faulty goods or services).

 

The survey revealed that most businesses do not review their contract terms regularly - the average time between contract reviews is typically four to five years. The length of time between reviews could mean that businesses are subjecting themselves to risk should new laws or regulations come into force that leave their terms and conditions outdated.

 

If you would like to ensure that your terms and conditions do not contain any unfair terms and comply with current legislation, please contact a member of our Commercial Team.

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