The European Unfair Contract terms Directive (hereafter: UCTD)194applies to terms in consumer contracts which have not been individually negotiated. Some member states of the European Union, for example Austria, Belgium, Denmark, Finland, France, Luxembourg and Malta extended the protective rules to individually nego- tiated contract terms.195 Also in the UK were unfair contract terms control was initially limited to non-negotiated terms,196 an extension to all terms, whether negotiated or not, has been realised in 2015 since, according to the legislator, that extension would only affect very few cases.197Along the lines of the UK reform in 2015 a similar extension was proposed in Ireland, but to date not adopted.
The Brazilian Consumer Protection Code applies an unfairness test to standard terms in consumer contracts and to individually negotiated unfair or
191See more in the contribution of Arbour in this book.
192Based on the responses to the questionnaire from professor Gary Low, Singapore Management University,garylow@smu.edu.sg.
193See the contribution of Yang to this book.
194O.J.1993, L 95/29.
195See Report of the Fitness Check of EU Consumer and Marketing Law (2017), p. 147.
196The Unfair Contract Terms Act of 1977 introduced control over the clauses of the contract which restricted or excluded liability and applied to both consumer contracts and non-consumer contracts.
197See the contribution of Cartwright to this book.
unconscionable198terms which are listed in a grey list. The unfairness test applied to standard contracts199is stricter. In order to be binding the Consumer Protection Code requires that standard contracts are drafted in legible and ostensible characters, with a font size of no less than 12 points, contributing to an easier understanding of the consumer. Furthermore, terms that imply a limitation of consumer rights must be highlighted, allowing their prompt and easy comprehension.200 If a business infringes abovementioned requirements the clauses concerned are not binding upon the consumer. A similar sanction results from the fact that the consumer is unaware of the contract purport201or if its wording lacks clarity.202It follows that in Brazil all terms in consumer contracts are subject to a double test, namely an (i) objective unfairness test of the contract terms and (ii) an assessment whether the business complied with the mandatory information disclosures set by law.203
German law differentiates between standard terms and non-negotiated individual terms in consumer contracts.“Standard contract terms are such terms that have been drafted in advance with the intention of multiple use and that are unilaterally implemented by one party. With regard to such terms, it is not relevant, whether the stipulating party is entrepreneur”.204Contract terms that have been drafted in advance for single use are characterised non-negotiated individual terms. In con- tracts concluded with consumers that contain those terms businesses are deemed to have inserted previously drafted terms into the contract, unless they have been inserted by the consumer. Additionally, individually negotiated terms have priority over conflicting standard terms and surprising stipulations do not become part of the contract.205
Greek unfair contract terms control does not apply either to individually negoti- ated terms. It focuses on standard terms but also applies to pre-drafted terms that have not been used in multiple contracts and to all terms that were not subject to individual negotiation. Individual negotiation refers to the extent to which the
198When a contract term is deemed unconscionable it must be considered null and non-binding to the consumer.
199The fact that one or more of the terms were subject to individual negotiation does not alter the qualification of the contract as a standard contract.
200See the contribution of Donato Oliva to this book.
201The consumer was not given the chance of previously getting acquainted with the terms of the contract.
202The terms are drafted in such a manner that their precise meaning and content is difficult to grasp for consumers. Thus, the Brazilian Superior Court of Justice held in the domain of insurance that the use of vague contract terms or terms which demand technical and/or legal knowledge of a level inconsistent with the reality of the insured person, is abusive. See the contribution of Donato Oliva to this book.
203Contract terms that do not comply with the requirements imposed by law or which were not sufficiently disclosed to the consumer are deemed unfair, even when they are drafted in clear wording.
204See the contribution of Schinkels to this book.
205See the contribution of Schinkels to this book.
consumer was capable of influencing the content of the contract. It can be the result of discussions between parties206 about the wording of terms whereby the seller/
supplier accepted changes as a result from the discussion.207In case individually negotiated terms in the contract contradict the pre-drafted terms, the individually negotiated terms will govern the contract.
The Romanian Civil Code, the Polish Civil Code and The Czech Civil Code as well as the Turkish and Taiwanese rules apply to standard terms only. Although the Czech Civil Code uses broader wording, seemingly including also individually negotiated terms in the unfairness test, the intention of the Czech legislator, as expressed in the preparatory works, was clearly to limit the unfairness control to standard terms. It thus remains unclear whether Czech courts will extend the unfairness control inspired by the broader wording of the legislation contrary to the preparatory works.208
The unfairness control in Japan applies to contract terms inadhesioncontracts with consumers. The Japanese Civil Code recently provided that terms in adhesion contracts which are contrary to good faith must be considered as non-written. The sanction can be avoided only if the business provides proof that the term was individually negotiated, for instance by submitting evidence that the contracts which the business concluded with other consumers do not contain the same terms.209Furthermore, a term that restricts the rights granted by law to consumers is considered to be null of its own, irrespective of whether it was included in an adhesion contract with a consumer or individually negotiated with him.
Also the Canadian Civil Code targets unfair terms inadhesioncontracts.210The legislation includes protection relating to illegible, incomprehensible, external and abusive clauses and extends protection to parties that have lost bargaining power, including parties in B2B contracts.211A clause which is illegible or incomprehen- sible212to a reasonable person is null if the consumer or the adhering party suffers injury therefrom, unless the other party proves that an adequate explanation of the nature and scope of the term was given. The illegibility of a term is to be assessedin abstractotaking an ordinary adherent who can read and is able to understand as a
206The consumer’s ability to negotiate is assessed both objectively and subjectively. The objective capacity refers to the location, duration of negotiations, complexity of the transaction etc.., whilst the consumer’s subjective capacity refers to his experience, age, literacy,... See more in the contribution of Karampatzos and Kotios to this book.
207Karampatzos and Kotios note that this also could lead to situations where the consumer is denied protection in case the negotiations turned out unfruitful for him.
208See the contribution of Selucká, Staviková Reznicková and Loutocký to this book.
209See the contribution of Nozawa to this book.
210These are contracts whereby the essential stipulations are drawn up by one of the parties and are not negotiable.
211See the contribution of Arbour to this book.
212The incomprehensibility refers in the first place to the grammatical accuracy but also goes beyond the meaning of the words and the grammatical formulation.
benchmark.213In the case of a consumer contract the illegibility must be tested in the light of an average, lay, untrained and inexperienced consumer.
A similar nullity applies to the external clauses referred to above. A term is external if at the time of formation of the contract it was not expressly214brought to the attention of the consumer or the adhering party, unless the other party proves that the consumer or adhering party knew of it.215 Finally, also abusive terms in consumer or adhesion contracts are sanctioned with nullity or the reduction of the obligation. Unfair is a term which is excessively and unreasonably detrimental to the consumer or the adhering party, and is therefore contrary to the requirements of good faith. This is particularly the case if a term so departs from the fundamental obligations arising from the rules normally governing the contract that it changes the nature of it into an abusive clause.216In case of doubt or ambiguity the consumer or adhesion contract must be interpreted in favour of the consumer/adhering party.217
The Singaporean Unfair Contract Terms Act applies to written standard terms,218 but does not provide guidance on how to distinguish individually negotiated terms
213A clause was held illegible because it was written on a document’s back in very pale grey on a white background. See the contribution of Arbour to this book.
214This implies an explicit reference to another document, the back of a document or another regulation. In case of distance contracts the fact of having to click for further information does not necessarily point to an external term.
215See the contribution of Arbour to this book. The Czech Civil Code also renders standard commercial terms which the other party could not have reasonably expected ineffective, unless they were expressly accepted by that party. The aim is to reduce the surprise factor. However, the Czech Supreme Court is rather reluctant to categorize commercial terms as‘surprising terms’. Such classification necessitates a clear discrepancy between the content of the term and the expectation of the other party (it could not have been reasonably expected—subjective criterion) on the one hand and on the other hand the peculiar nature of the content of the commercial term (is the term unusual when assessed in the light of the contract as a whole—objective criterion). See the contribution of Selucká, Staviková Reznicková and Loutocký to this book.
216In a striking parallel the CJEU defined good faith in theAziz-case were it held that“the national court must assess for those purposes whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to such a term in individual contract negotiations”and that‘a significant imbalance’is to be assessed in the light of the rules of national law that would apply in the absence of an agreement by the parties in that regard.“Such a comparative analysis will enable the national court to evaluate whether and, as the case may be, to what extent, the contract places the consumer in a legal situation less favourable than that provided for by the national law in force”(see CJEU 14 March 2013, C-415/11, Aziz, ECLI:EU:C:2013:164). InConstructora Principado the CJEU added that such imbalance“can result solely from a sufficiently serious impairment of the legal situation in which the consumer, as a party to the contract in question, is placed by reason of the relevant national provisions, whether this be in the form of a restriction of the rights which, in accordance with those provisions, he enjoys under the contract, or a constraint on the exercise of those rights, or the imposition on him of an additional obligation not envisaged by the national rules”(CJEU 16 January 2014, C-226/12, Constructora Principado, ECLI:EU:C:2014:10).
217A similar interpretation rule can be found in the European UCTD.
218The Act applies to standard terms in consumer contracts or where a party deals on the basis of the other’s standard terms.
from standard terms. Whether a term is individually negotiated turns on the facts of each case and the fact that a contract has been negotiated does not necessarily exclude the presence of standard terms and thus the application of the Unfair Contract Terms Act. However, case law provides for some guidance and points to the following determinative criteria:“(i) the degree to which the‘standard terms’are considered by the other party as part of the process of agreeing the terms of the contract (ii) the degree to which the‘standard terms’are imposed on the other party by the party putting them forward (iii) the relative bargaining position of the parties (iv) the degree to which the party putting the‘standard terms’is prepared to entertain negotiations with regard to the terms of the contract generally and the ‘standard terms’in particular”.219Although it may be expected that the overwhelming major- ity of terms in consumer contracts will be considered standard terms, there exists no express presumption to that extent.220
Also Chinese Law imposes protective rules for standard terms only defined as clauses that are prepared in advance for general and repeated use by one party, and which are not negotiated with the other party when the contract is concluded.221 When standard terms are inconsistent with non-standard terms, the latter will prevail.
Beside the application of the general principle of fairness also a specific obligation is imposed on the party that imposes the standard terms. This party has to explain the terms and inform the other party of the liability restrictions or exemptions in favour of the party providing the standard terms.222 A standard term will in general be invalid if the party providing the standard terms exempts itself from its liability, increases the other party’s liability or deprives the other party of its material rights guaranteed by law.223It must be noted that Chinese law does not distinguish in this respect between B2C and B2B relationships, but Chinese Consumer Protection Law additionally imposes on businesses to remind the consumer in a conspicuous manner of the content of the terms that are vital to his interests, including terms relating to the product’s quality, quantity, price or additional costs, the contract’s duration and manner of performance, the safety precautions and risk warnings, the after sales service and the civil liability etc.224
In most jurisdictions the seller has to prove that a term had been individually negotiated.225In Greece and Poland the burden of proof is incumbent on the party
219Based on the responses to the questionnaire from professor Gary Low, Singapore Management University,garylow@smu.edu.sg.
220Based on the responses to the questionnaire from professor Gary Low, Singapore Management University,garylow@smu.edu.sg.
221See the contribution of Yang to this book.
222See the contribution of Yang to this book.
223See the contribution of Yang to this book.
224See the contribution of Yang to this book.
225Proof will often not be that easy. The Romanian High Court of Cassation for instance held that a clause in the contract wherein the consumer recognizes that the whole contract had been individ- ually negotiated cannot reverse the burden of proof. That will neither be the case if the seller accords a reflexion period to the consumer. It must be demonstrated that the consumer effectively exercised
claiming that a contract term had been individually negotiated, in most cases the seller.226It must be submitted that European courts will indirectly take into account whether there was in fact negotiation between the parties over a term when assessing
‘good faith’and‘significant imbalance’as parts of the unfairness test.227According to the Irish High Court the requirement of good faith “mandates fair and open dealing, with the result that contractual terms must be expressed fully, clearly, and legibly by a seller/supplier, with suitable prominence being given to any disadvan- tageous terms, and all concealed pitfalls and traps avoided, in effect adherence to what might be described as good standards of commercial practice. (. . .) As for fair and equitable dealing, what this requires in effect is that a seller/supplier should not take advantage of, inter alia, a consumer’s necessity, indigence, inexperience, unfamiliarity with the subject-matter of a contract, or like characteristics or traits, and must take a consumer’s legitimate interests into account”.228
an influence on the content of the contract, e.g. on the basis of written documents or an exchange of e-mails that shows that clauses have been reviewed. In the same vein, the Italian Court of Cassation held that only in case of specific, individual, serious and effective negotiation the unfairness control of consumer contracts may be avoided. The Brazilian Consumer Protection Code is less demanding;
it reverses the burden of proof in favour of the consumer when his allegation is credible or when he is in a position of hyper dependency. Hyper dependency refers to the difficulty of the consumer to provide evidence of a certain fact. Whether a consumer’s allegation is credible is assessed on the basis of a probability criterion based on the arguments advanced during the proceeding. In Germany the burden of proof regarding the characterization of contractual stipulations as standard contract terms lies in principle with the party relying on special control of such terms. With regard to consumer contracts the business is deemed to have implemented previously drafted terms into the contract, unless they have been inserted by the consumer. It follows that the burden of proof lies with the business. However, the German BGB indicates that it is up to the consumer to proof the drafting in advance and its causation for the consumer’s inability to influence the substance of the term. See the contribution of Schinkels to this book.
226If consumers claim that no negotiation took place, the burden of proof shifts to the seller. An exchange of e-mails with draft terms that were reviewed by the parties or meetings of the parties in person to that extent may constitute such proof. See the contribution of Karampatzos and Kotios to this book. German courts evaluate the factual indications already given by the parties. In case of contradiction between parties’statements, a copy of the written contract can be of help:“if it is contained in a specially printed or designed form, this prima facie indicates pre-formulation and unilateral implementation. If one clause of a form has been individually altered, this may be taken as a sign that other terms of the form were also subject to negotiation”, see the contribution of Schinkels to this book.
227For example, according to the Polish Civil Code terms in B2C-contracts which have not been negotiated individually are not binding on the consumers if rights and obligations are set in a way that is contrary to‘good practice’, thereby grossly violating the consumer’s interests. See the contribution of Namyslowska and Jablonowska to this book.
228See the contribution of Kelly to this book.