In this fourth and final bulletin, we explore how the Consumer Rights Act (“CRA”) will impact upon pre-existing legislation that deals with unfair contract terms in relation to goods and services.

Unfair contract terms

The CRA consolidates the existing unfair terms legislation which applies to consumers when dealing with traders currently found in the Unfair Contract Terms Act 2007 (“UCTA”) and the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCRs”). UCTA and the UTCCRs have long been considered as inconsistent, unnecessarily complex and difficult to apply. Under the CRA, UCTA is amended and the UTCCRs repealed.

What is covered?

• Consumer contracts (other than for employment or apprenticeships); and
• A notice to the extent that it relates to rights or obligations between a trader and a consumer or purports to exclude or limit a trader’s liability to a consumer. A notice does not need to be in writing but is any communication or announcement as long as it is reasonable to assume it is intended to be seen or heard by a consumer. For the first time, notices are explicitly included in the regime.

Points to note

• All written terms in consumer contracts and notices must be transparent. A term is transparent if it is expressed in plain and intelligible language and is legible (in the case of a written term).
• A consumer is not bound by a term in a contract with a trader or a notice issued by a trader if that term or notice is unfair. The fairness test reflects that which is currently found in the UTCCRs i.e. “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.” Price/subject matter contract terms are only exempt from the fairness test if they are transparent and prominent. A term is prominent if it is brought to the attention of the consumer in such a way that an average consumer would be aware of the term.

• Some terms or notices are “blacklisted” so that they are never binding on a consumer – for example, no exclusion or limitation of liability for death or personal injury.
• Three new terms are added to the “grey list”:
  1. Disproportionately high charges where the consumer decides not to conclude or perform the contract or for services which have not been supplied;
  2. Terms which allow the trader to determine the characteristics of the subject matter after the consumer is bound; and
  3. Terms which allow the trader to determine the price after the consumer is bound.
• The CRA expressly states that the Courts must review contract terms for fairness.
• Where a term can have more than one meaning, the interpretation most favourable to the consumer will prevail.
• Where a clause is not binding as a result of being unfair, the rest of the contract will take effect as far as practicable.

Advice :

• The consolidation of the unfair terms legislation, whilst broadly a restatement of the existing law, should act as a call to action for any business contracting with consumers to review their contractual terms and any notices (especially where these try to limit the liability of a business), as the implementation of the CRA is likely to lead to increased consumer awareness of their rights and a crack down by the enforcement authorities.
• Please see below for links to our previous 3 blogs on the changes bought in by the CRA.
  • Part 1: New digital content rights for the 21st Century become law today
    Part 2: Consumer Law Reform
    Part 3: Consumer Law Reform

If you would like any further information or assistance in ensuring your business is CRA compliant, please don’t hesitate to contact me.