The general control is contained in section 62 of the Consumer Rights Act 2015, which provides that an unfair term of a consumer contract137—except for (generally) a term specifying the main subject matter of the contract or the price138—is not binding on the consumer, unless the consumer so chooses; and that 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.”In determining whether a term is fair, the nature of the subject matter of the contract is taken into account, and all the circumstances existing when the term was agreed and all the other terms of that or any related contract. In Schedule 2 of the Act there is a “grey list” (“indicative and non-exhaustive”) of terms of consumer contracts that may be regarded as unfair;
but under section 65 there is an absolute restriction on clauses which exclude or restrict the trader’s liability for death or personal injury caused by negligence.139 These provisions implement the Directive on unfair terms in consumer con- tracts,140although there are some significant extensions to the scope of protection offered to consumers.
136Consumer Rights Act 2015 ss 31 (goods), 47 (digital content), 57 (services).
137Similarly, an unfair (non-contractual) consumernotice: although this is not the subject of this paper.
138See below Sect.4.2.2.
139Consumer Rights Act 2015 s 65. This has its origin in the Unfair Contract Terms Act 1977 s 2 (which, after the amendment by the Consumer Rights Act, still applies to non-consumer contracts and notices).
140Above, Sect.1.2.
4.2.1 Bargaining Power Under Part 2 of the Consumer Rights Act 2015
The Directive limited the scope of control to terms which have not been individually negotiated,141thus identifying an inherent bargaining weakness in consumers which might be remedied in cases where the consumer was able to influence the substance of the term by negotiation. It was therefore aimed in particular at standard-form contracts. The implementations of the Directive in English law in 1994142 and 1999143 followed the Directive by limiting control to non-negotiated terms, but following a review by the Law Commission the new implementation in the 2015 Act applies to all terms, whether negotiated or not, on the basis that:
This will affect very few cases.. . .[I]n practice the vast majority of negotiated terms fall within the exemption for main subject matter or price. Where terms about other issues are genuinely negotiated, they are unlikely to be found unfair. On the other hand, the current exemption for negotiated terms in the [Unfair Terms in Consumer Contracts Regulations144] encourages unnecessary argument and litigation. The legislation will be simpler and more easily enforced if the distinction between standard terms and negotiated terms is removed.145 In this context, there is therefore now no formal distinction in English law between standard terms and individually negotiated terms; nor does the Consumer Rights Act 2015 refer explicitly to the relative bargaining power of the consumer and the trader—in effect, it assumes that the consumer/trader relationship is in itself to be protected. However, this does not mean that the particular consumer’s bargaining power—and whether there was in fact negotiation between the parties over a particular term that the consumer later wishes to challenge—is irrelevant. The application of the core test of“unfairness”of the term—“good faith”and“significant imbalance”—will naturally take such things into account, as indeed is reflected in the Preamble to the Directive itself:“whereas, in making an assessment of good faith, particular regard shall be had to the strength of the bargaining positions of the parties. . .”146The UK Supreme Court147has applied the approach of the Court of Justice of European Union, which has said that in assessing whether imbalance arises
“contrary to the requirement of good faith”within the meaning of the Directive,“the national court must assess for those purposes whether the seller or supplier, dealing
141Directive 93/13/EEC art 3.
142Unfair Terms in Consumer Contracts Regulations 1994 (SI 1994/3159) reg 3.
143Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083) reg 5.
144Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083).
145Law Commission,“Unfair Terms in Consumer Contracts: Advice to the Department for Busi- ness, Innovation and Skills” (March 2013; available athttp://www.lawcom.gov.uk/wp-content/
uploads/2015/06/unfair_terms_in_consumer_contracts_advice.pdf), xii.
146Directive 93/13/EEC recital 16. The consumer’s bargaining position was taken into account by the House of Lords in assessing fairness inDirector General of Fair Trading v First National Bank plc[2001] UKHL 52, [2001] 1 AC 481, although this was a decision on the 1994 Regulations, which expressly included the elements set out in recital 16 of the Directive in defining the test of good faith.
147ParkingEye Ltd v Beavis[2015] UKSC 67, [2016] AC 1172 [105], [204].
fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to such a term in individual contract negotiations.”148Although this statement is made in the context of the Directive, which is limited in scope to non-negotiated terms, it seems likely that an English court would take the same general approach to the interpretation of the 2015 Act.
4.2.2 Core Terms and Transparency of Terms Under Part 2 of the Consumer Rights Act 2015
So-called core contract terms are generally excluded from the unfairness test.
According to section 64(1) of the Consumer Rights Act 2015:
A term of a consumer contract many not be assessed for fairness. . .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.
The scope of an earlier formulation of this exclusion,149which is based on the Directive,150 was subject to debate, and the Supreme Court held in 2009, in the context of contracts between banks and consumers for the operation of current accounts, that“price”included charges levied for unauthorised overdrafts, therefore excluding such charging structures from judicial control.151
The Directive excludes terms on the main subject matter and price from review only if they are“in plain intelligible language”.152The Consumer Rights Act 2015 has gone further—partly in response to a decision on bank charges,153 but also reflecting recent case-law of the Court of Justice154—and provides that the exemp- tion applies only if the core term is transparent and prominent; and it expands on these terms to make clear that the purpose is to ensure that the consumer (or, at least, the average consumer) is properly informed about the core term before it becomes immune from challenge:
(2) [Section 64(1), above] excludes a term from an assessment under section 62 only if it is transparent and prominent.
148Aziz v Caixa d’Estalvis de Catalunya, Tarragona i Manresa(Case C-415/11) EU:C:2013:164;
[2013] 3 CMLR 5 [69].
149Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083) reg 6(2).
150Directive 93/13/EEC art 4.2.
151Office of Fair Trading v Abbey National plc[2009] UKSC 6, [2010] 1 AC 696.
152Directive 93/13/EEC art 4.2.
153Office of Fair Trading v Abbey National plc [2009] UKSC 6, [2010] 1 AC 696; see Law Commission “Unfair Terms in Consumer Contracts: Advice to the Department for Business, Innovation and Skills”Part 2.
154Whittaker (2017), p. 54.
(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.155
In addition, there is a general requirement that all written terms of a consumer contract be transparent—again, defined as being expressed in plain and intelligible language, and legible. No specific sanction is defined for breach of this general requirement, although no doubt it will be relevant to the application of the test of unfairness. There is also a provision that if a term could have different meanings, the meaning that is most favourable to the consumer is to prevail.156In addition to the private law consequences between the parties to the consumer contract, the 2015 Act confers on the Competition and Markets Authority and other regulators investigatory and enforcement powers, including the power to obtain injunctions to prevent the continued use of unfair standard terms.157
5 Sector Speci fi c Rules: The Financial Consumer
Given the general approach in English law to fragmentation of information duties,158 it is not surprising that there are separate, specific duties of information in the financial sector, and even that there are different duties in different parts of the financial sector. Here two specific examples will be given: consumer credit and consumer hire contracts, and consumerfinancial services.