Unfair Term in a Contract

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Unfair Term in a Contract

After the Treaty of Maastricht, the European Community made a

directive on Unfair Terms in Consumer Contracts 1993. This instructed

member states to pass domestic legislation to provide consumer

protection. As a result, the UK Government made the Unfair Terms in

Consumer Contracts Regulations 1994 which have now been replaced by

the Unfair Terms in Consumer Contracts Regulations 1999. The main aim

of the new regulations is for UK Law to be drafted more closely to the

wording of the European Legislation, to help prevent discrepancies

between the two. The principle change from the 1994 regulations and

the 1999 regulations are simply that more institutions are now able to

enforce the legislation, beyond the Director-General of Fair Trading.

An unfair term is defined in Regulation 5(1) of the Unfair Terms in

Consumer Contracts Regulations 1999 as;

‘ A contractual term which has not been individually negotiated shall

be regarded as unfair if, contrary to the requirement of good faith,

it causes a significant imbalance in the parties rights and

obligations arising under the contract, to the detriment of the

consumer’ 1

In addition to this Reg 6 of the same Regulations states that,

‘ …..the fairness of a contractual term shall be assessed, taking into

account the nature of the goods or services for which the contract was

concluded and by referring, at the time of conclusion of the contract

and to all the other terms of the contract or of another contract on

which it is dependent.2

Schedule 2 of the 1999 regulations contains a list of 17 non

exhaustive and indicative terms wh...

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... LJ, Interfoto Picture Library Ltd V Stiletto Visual

Programmes Ltd 1989, [1988] 1 All ER 348.

6 Unfair Terms in Consumer Contracts Regulations 1999 Reg 6(2)

7 E Mc Kendrick, Contract Law 4th Ed 2000 pg 367

8 Director- General of Fair Trading v First National Bank PLC (2002) 1

ALL ER 97

9 [1980] 2 All ER 548 at 551, [1980] 1 WLR 932 at 937.

10 Unfair Terms in Consumer Contracts Regulations 1999 Reg 8(1)

11 Unfair Terms in Consumer Contracts Regulations 1999 Reg 8(2)

12 P Richards, Law of Contract, 5th Ed 2001

13 Unfair Contract Terms; A case report bulletin issued by the Office

of Fair Trading Issue No 8 December f1999

14 Director- General of Fair Trading v First National Bank (2000)

15 C Elliott and F Quinn, Contract Law 3rd Ed 2001 pg 124

16 E Mc Kendrick, Contract Law 5th Ed 2003 pg 282

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