The European UCTD excludes terms on the main subject matter and price/quality ratio from unfairness review only if they are in plain intelligible language.229The UCTD also requires that all written terms230of a consumer contract be transparent, which means that terms must be legible and expressed in plain and intelligible language.231If a term has different meanings, the meaning that is most favourable to the consumer is to prevail.232
5.2.1 Case Law of the CJEU
The CJEU has given some very strong guidance on what is required for terms to be plain and intelligible.233This requirement was interpreted by the CJEU in theÁrpád Káslercase.234It held that the requirement of transparency should not be restricted to mere formal and grammatical intelligibility; the consumer must be informed in such a manner that he is in a position to evaluate on the basis of clear, intelligible criteria theeconomic consequencesfor him which derive from a term.
229See Article 4(2) UCTD. This exclusion from unfairness has not been incorporated in Austrian, Danish, Greek, Latvian, Luxemburg, Slovenian, Spanish and Swedish legislation, seeEC Con- sumer Law Compendium,2007, 379,ec.europa.eu/consumers/archive/cons_int/safe_shop/acquis/
comp_analysis_en.pdf.
230In Belgium the Unfair Contract terms Commission extended the transparency principle to oral terms, see C.O.B. 25, 19 November 2008,economie.fgov.be/nl/binaries/COB25_tcm325-74403.
pdf, 6. In the Netherlands the limitation to written terms has not been inserted in the transposing legislation, see Article 6:238, section 2 C.C.
231See Article 5 UCTD.
232In a rare Belgian case the judge concluded that the contract terms about the price for renting a house were not transparent now that the offer for rent on the website of the seller indicated a lower price; he concluded that the lower price on the website had to be applied and discarded the contract terms. See Vred. Grâce-Hollogne 25 mei 2012,JLMB2012/40, 1917–1925. Schinkels indicates that German courts have already ruled that it is possible to assess a standard contract term simply repeating the wording of a statute as unfair for want of transparency, see BGH, Judgment of 9. 5.
2001—IV ZR 138/99,Neue Juristische Wochenschrift (NJW)2001, 2012. See the contribution of Schinkels to this book.
233See more extensively on that issue Howells and Straetmans (2017), E-180-E-215. Both trans- parency requirements in Article 4 and 5 UCTD must be interpreted equally according to the CJEU, see to this extent Case C-26/13, Árpád Kásler, ECLI:EU:C:2014:282.
234See Case C-26/13, ECLI:EU:C:2014:282.
In RWE Vertrieb235 and in Naranjo236 the fundamental importance of pre-contractual information for consumers was emphasized since consumers decide on that basis to be bound by a contract. For that reason the consumer must actually be given an opportunity to examine all the terms of the contract.
Furthermore, consumers must be informed of their rights thatflow from manda- tory national law of which they are beneficiaries. This follows from theInvitel237and VKI/Amazon238judgments. InInvitelthe CJEU held that“where certain aspects of the method of amendment of the fees connected with the service to be provided are specified by mandatory statutory or regulatory provisions within the meaning of Article 1(2) of the Directive, or where those provisions provide, for the consumer, the right to terminate the contract, it is essential that the consumer be informed of those provisions by the seller or supplier”. InVKI/Amazonthe CJEU confirmed that the transparency requirement must be interpreted broadly, having regard to the consumer’s weak position vis-à-vis the seller or supplier with respect in particular to his level of knowledge. This implies that where the effects of a term are specified by mandatory statutory provisions, it is essential that the seller or supplier informs the consumer of those provisions. “That is the case of Article 6(2) of the Rome I Regulation, which provides that the choice of applicable law must not have the result of depriving the consumer of the protection afforded to him by provisions that cannot be derogated from by agreement by virtue of the law which would have been applicable in the absence of choice”.239 It follows that if a term leads the consumer into error by giving him the impression that only the law of the Member
235CJEU 21 March 2013, Case C-92/11, RWE Vertrieb, ECLI:EU:C:2013:180, para 44:“Infor- mation, before concluding a contract, on the terms of the contract and the consequences of concluding it is of fundamental importance for a consumer. It is on the basis of that information in particular that he decides whether he wishes to be bound by the terms previously drawn up by the seller or supplier“. Compare para 50:“With respect, in thefirst place, to the information to be given to the consumer, it is clear that that obligation to make the consumer aware of the reason for and method of the variation of those charges and his right to terminate the contract is not satisfied by the mere reference, in the general terms and conditions, to a legislative or regulatory act determining the rights and obligations of the parties. It is essential that the consumer is informed by the seller or supplier of the content of the provisions concerned”. Furthermore“the lack of information on the point before the contract is concluded cannot, in principle, be compensated for by the mere fact that consumers will, during the performance of the contract, be informed in good time of a variation of the charges and of their right to terminate the contract if they do not wish to accept the variation” (para 51).
236CJEU 21 December 2016, Joined Cases C-154/15and C-307/15, Gutiérrez Naranjo e.a., ECLI:
EU:C:2016:980, paras. 48–51. The CJEU did not contradict the Spanish court’s interpretation of the requirement of transparency, referred to in Article 4(2) of the directive, as not being limited to the requirement for formal transparency of contractual clauses in relation to the plain and intelligible nature of their drafting, but as extending to their substantive transparency linked to the adequacy of the information supplied to the consumer concerning the extent, both legal and economic, of the consumer’s contractual commitment.
237CJEU 26 April 2012, Case C-472/10, Invitel, EU:C:2012:242, para 29.
238CJEU 28 July 2016, Case C-191/15, VKI v Amazon, ECLI:EU:C:2016:612, para 68.
239CJEU 28 July 2016, Case C-191/15, VKI v Amazon, ECLI:EU:C:2016:612, para 69 partim.
State in which the seller or supplier is established applies to the contract, without informing him that under Article 6(2) of the Rome I Regulation he also enjoys the protection of the mandatory provisions of the law that would be applicable in the absence of that term, this term must be considered as unfair.240
The need for more than mere formal and grammatical ability to understand contract terms has been subsequently applied inMatei v SC Volksbank Romania SA,241 Bucura242 and Van Hove v CNP Assurances SA.243 Van Hove v CNP Assurances SA244concerned a combined loan contract with an insurance contract intended to ensure that mortgage loan repayments are covered. The CJEU empha- sized the relevance of the fact that the contract at issue forms part of a broader contractual framework. As a result the contractual framework may also have an impact on the average consumer’s level of attention. The Court said that “the consumer cannot be required, when concluding related contracts, to have the same vigilance regarding the extent of the risks covered by that insurance contract as he would if he had concluded that contract and the loan contracts separately”.245
Also inRuxandra Paula Andriciuc246the CJEU confirmed its broad interpreta- tion of the transparency requirement, this time in respect of a term that placed all the exchange risk connected to a loan in foreign currency on the consumer. It held that
“the requirement that a contractual term must be drafted in plain intelligible language is to be understood as requiring also that the contract should set out transparently the specific functioning of the mechanism to which the relevant term relates and the relationship between that mechanism and that provided for by other contractual terms, so that that consumer is in a position to evaluate, on the basis of clear,
240It is interesting to note that the CJEU automatically connected the sanction of unfairness to a term that misleads a consumer whereby the misleading impression of the consumer is caused by the lack of information provided by the supplier or the seller.
241CJEU 26 February 2015, Case C-143/13, Matei, ECLI:EU:C:2015:127, paras 73–77. The reference in para 77 to“the lack of transparency, in the agreements at issue in the main proceedings, of the statement of the grounds justifying those terms”seems to suggest that apart from informing the consumer about the economic consequences of a term, also information about the economic motives of the business using those terms could be part of the transparency requirement.
242CJEU 9 July 2015, C-348/14,Bucura, EU:C:2015:447. See alsoinfra.
243CJEU 23 April 2015, Case C-96/14,Jean-Claude Van Hove v. CNP Assurances SA, ECLI:EU:
C:2015:262.
244CJEU 23 April 2015, Case C-96/14,Jean-Claude Van Hove v. CNP Assurances SA, ECLI:EU:
C:2015:262.
245See para 48. A similar mitigating approach can be seen in CJEU 3 April 2014, Case C-342/13, Katalin Sebestyén, ECLI:EU:C:2014:1857, para 34, where the Court held:“even assuming that the general information the consumer receives before concluding a contract satisfies the requirement under Article 5 that it be plain and intelligible, that fact alone cannot rule out the unfairness of a clause providing for the exclusive competence of a single arbitration tribunal”.
246CJEU 20 September 2017, Case C-186/16, Ruxandra Paula Andriciuc e.a., ECLI:EU:
C:2017:703.
intelligible criteria, the economic consequences for him which derive from it”.247 More specifically, the consumer must be provided with all the information likely to have a bearing on the extent of his commitment so that he is enabled to estimate in particular the total cost of his contract.“First, whether the terms are drafted in plain intelligible language enabling an average consumer, that is to say a reasonably well- informed and reasonably observant and circumspect consumer to estimate such a cost and, second, the fact related to the failure to mention in the loan agreement the information regarded as being essential with regard to the nature of the goods or services which are the subject matter of that contract play a decisive role in that assessment”.248
In the same vein, the CJEU stressed the importance of the APR in consumer credit contracts inPohotovost249andMaria Bucura.250Informing the consumer of the total cost of credit, in the form of an interest rate calculated according to a single mathematical formula, is of critical importance as it contributes to the transparency of the market, enables the consumer to compare offers of credit and enables him to assess the extent of his liability. Hence,“the failure to mention the APR in the credit agreement at issue, the mention of the APR being essential information in the context of Directive 87/102 (consumer credit), may be a decisive factor in the assessment by a national court of whether a term of a credit agreement concerning the cost of that credit in which no such mention is made is written in plain, intelligible language within the meaning of Article 4 of Directive 93/13”.251
Finally, providing consumers with information on contract terms in plain and intelligible language cannot be used as a defence against the non-binding character of a contract term that eventually turns out to be unfair.252
247CJEU 20 September 2017, Case C-186/16, Ruxandra Paula Andriciuc e.a., ECLI:EU:
C:2017:703, para 45.
248Idem, para 48. It follows that financial institutions must provide borrowers with adequate information to enable them to take well-informed and prudent decisions. It follows that the borrower must be clearly informed of the fact that, in entering into a loan agreement denominated in a foreign currency, he is exposing himself to a certain foreign exchange risk which will, potentially, be difficult to bear in the event of a fall in the value of the currency in which he receives his income.
Furthermore the seller or supplier, in this case the bank, must be required to set out the possible variations in the exchange rate and the risks inherent in taking out a loan in a foreign currency, particularly where the consumer borrower does not receive his income in that currency (see also paras 49–50).
249CJEU 16 November 2010, Case C-76/10,Pohotovost, ECLI:EU:C:2010:685.
250CJEU 9 July 2015, Case C-348/14,Maria Bucura, ECLI:EU:C:2015:447.
251CJEU 16 November 2010, Case C-76/10,Pohotovost, ECLI:EU:C:2010:685, para 71.
252See to this extent, CJEU 3 April 2014, Case C-342/13, Katalin Sebestyén, ECLI:EU:
C:2014:1857, para 34; see also supra.
5.2.2 Application of Transparency in the EU and beyond
In line with the UCTD the exemption for core contract terms in most of the EU countries is subject to a transparency requirement.253 Similar rules apply in Turkey.254The standard to be used is that of theaverage consumerbut in practice the CJEU applied this test in a way which promoted consumer protection. To what extent the EU member states will follow suit, remains to be seen.255In the UK for instance there are now many lower court decisions applying the Directive, some- times in a manner that is very loyal to European law.256 However, attention has focussed on Supreme Court decisions that appear to be less consumer friendly. In fact the Supreme Court has recently considered the test to be opaque.257
It has been mentioned before that there is no or very little legislative guidance on how the transparency requirement must be applied.258Consequently national courts when assessing the transparency of contract terms enjoy a broad discretion. The absence of sufficient legislative guidance has led to divergent interpretations of the transparency requirement, despite the gapfilling case law of the CJEU referred to above. In Poland for instance the clarity requirement of core terms259refers to the
253Denmark, Finland, Portugal, Slovenia and Spain extend the unfairness control to core contract terms (see Report of the Fitness Check of EU consumer and marketing law, European Commission Staff Working Document, Brussels, 23 May 2017, SWD(2017)209final, 147).
254Turkish law is also in other aspects aligned to the UCTD and requires for instance that consumers should be given the possibility to effective take notice of the terms. In the presence of ambiguous terms, an interpretation in favour of consumers applies. See the contribution of Baysal to this book.
255This is the result of the minimum harmonisation set forth in the UCTD which nonetheless allows member states to adopt stricter standards. It must be submitted also that the (settled) case law of the CJEU when interpreting European legislation must be applied by national courts.
256These courts require not only that the term be comprehensible for that consumer but also that the typical consumer can understand how the term affects the rights and obligations that he and the seller have under the contract.
257See Lords Neuberger and Sumption inCavendish Square Holding BV v Makdessi; ParkingEye Ltd v Beavis[2015] UKSC 67, 2015] 3 WLR 1373, at para 105. Lord Carnwath agreed. Yet, it must be noted that the vagueness of the requirement combined with the discretion accorded to national courts in applying the EU law as interpreted by the CJEU makes it hard to say the Supreme Court has wrongly applied the law. See more extensively on this subject, Howells and Straetmans (2017), pp. E-180–E-215. The Report of the Fitness Check of EU consumer and marketing law stated that the lack of clarity of some of the provisions of the UCTD could be addressed through specific Commission guidance (see Report of the Fitness Check of EU Consumer and Marketing Law2017, p. 77).
258In its report on thefitness check of EU marketing and consumer law The European Commission recognizes that the length of standard terms and conditions is found to be a considerable obstacle for consumers in identifying unfair terms. It also indicates that it is working with all stakeholders on voluntary principles for better presentation of both standard contract terms and pre-contractual information (see Report of the Fitness Check of EU Consumer and Marketing Law2017, pp. 78 and 86).
259According to the Polish Supreme Court the lack of transparency of a standard term can in itself constitute an unfair term, irrespective of whether it contributes to a significant imbalance of the parties’rights and obligations to the detriment of the consumer. See Judgment of the Supreme Court
substance of the standard term concerned and is satisfied if the term allows for only one possible meaning viewed from the perspective of the average consumer. Greek case law developed three principles for the assessment of the transparency of a contract term. First, the principle that contract terms must be clear (grammatically correct and succinct, no use of obscure terms) and comprehensible (referring to the subjective ability of the consumer to realize the term’s true meaning); second, the principle of the determinable content of terms (no use of vague terms); and third, the principle of foreseeability of terms (prohibiting unexpected, unusual, surprising or misleading terms).260Italian courts seem to apply anex postcase-by-case approach by exclusion. Clauses that obviously do not correspond to the transparency require- ment are excluded, such as contradictory terms in the consumer contract, e.g. terms that are drafted in highly technical (financial) language and terms in an ambiguous, vague language.261 This a posteriori application of the transparency principle is considered quite ineffective, especially for the more vulnerable consumers for whom no specific rules are enacted.262
French case law remains quite hesitant to apply the transparency principle on core terms for historical reasons.263Czech case law also shows that the exclusion from the unfairness test of core contract terms is not subject to an elaborated transparency requirement.264
In contrast, Romanian courts tend to take into account all the relevant circum- stances of the conclusion of the contract when assessing transparency and do so to an extent that the test becomes to a certain degree concrete and subjective, especially when the consumer concerned appears to be particularly vulnerable.265
The most protective approach is to be found in Finland where core contract terms are not excluded from the unfairness test.266A similar protection seems available in
in case I CSK 72/15 (n 27) and more in the contribution of Namyslowska and Jablonowska to this book.
260Businesses must secure that contract terms correspond to those three principles assessed from the point of view of an average consumer, who is assumed to be a self-aware and responsible person.
Dellios (2015), pp. 118–119.
261See more extensively, Giorgianni (2009), p. 209 e.s. Also French case law condems the use of very complex and technical terms without any further explanation in insurance contracts; see Piazzon in this book. Also the High Court in Prague stated that a contract due to its legal constructions was completely incomprehensible:“Obviously, the text of the contract is deliberately designed so that by its complex constructions it prevents a person who does not have legal education and a certain economic overview from understanding the true meaning of the contract covenant”. See the ruling of the High Court in Prague,file No. 76 Cm 876/2010, referred to in the contribution of Selucká, Staviková Reznicková and Loutocký to this book.
262See the contribution of Benacchio to this book.
263See Rochfeld (2004), p. 981.
264See Rita Illdiko Sik-Simon (2017).
265See the contribution of Bercea and Caramidariu to this book.
266Furthermore, the Finnish Consumer Protection Act introduces specific provisions regarding the adjustment of unfair contract terms which have been drafted without the consumer having been able to influence the contents thereof. The provisions regarding the adjustment of an individual