The Unfair Terms in Consumer Contracts Regulations 1999, SI 1999/2083, incorporates Directive 93/13/EC into law of the United Kingdom. Repeals The Unfair Terms in Consumer Contracts Regulations 1994.
These Regulations overlap somewhat with the Unfair Contract Terms Act 1977
which deals specifically with exemption clauses
. The Directive
set out requirements that in many ways are narrower than rules already in place in English law
. It does, however, extend the scope of terms
which can be rendered ineffective; especially when dealing with unfair terms
that do not constitute exemption clauses
. It also has provisions specifically for standard form contract
The regulations only work to render ineffective terms that benefit seller or suppliers, in the favour of consumers.
Definition of Unfair
Regulation 5(1) sets defines the principle of unfair.
- Has not been individually negotiated
- Causes significant imbalance in the parties rights and obligations.
- Contrary to the requirement of good faith.
"Has not been individually negotiated" encompasses terms of which the consumer has not had the opportunity to mould. Terms that have been individually negotiated are outside this regulation, the contract however, and other terms, may be.
"Causes significant imbalance". This requires the term to be to the detriment of the consumer and benefit the seller or supplier to an excessive degree.
"Contrary to good faith". In the complex case of Director General of Fair Trading v First National Bank, the bank's seemingly unfair interest term was found to be in good faith as the term guarded the bank from a possible situation of receiving no interest defeating their business objective.
Schedule 2 sets out an indicative, non-exhaustive list of terms that would be unfair.
Effect of Unfair Term
Regulation 8 provides that an unfair term
"shall not be binding upon the consumer".