The CMA has published updated guidance to take account of changes introduced by the Consumer Rights Act 2015.
What’s the issue?
The Consumer Rights Act 2015 (CRA) updates the law on unfair contract terms in consumer contracts. It replaces the consumer facing provisions of the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations. New elements include:
- the fact that notices are explicitly included in the regime;
- written terms in consumer contracts and notices must be fair and transparent (in plain and intelligible language if written);
- the scope of terms which may be assessed for fairness; and
- three new additions to the ‘grey list’ of terms which may be regarded as unfair.
What’s the development?
The Competition and Markets Authority (CMA), which replaced the OFT and Competition Commission, has published updated guidance on unfair terms to take account of the changes introduced by the CRA. Detailed guidance intended particularly for use by in-house and trade association advisers as well as lawyers and enforcers, is complemented by shorter CMApublications aimed at smaller businesses which provide an introduction to unfair terms law and unfair terms enforcement. The guidance:
- explains the fairness and transparency tests;
- considers the exemptions from the assessment of fairness;
- considers contract terms and notices which are always unenforceable independent of the fairness test (blacklisted terms);
- explains why the CMA considers some terms or notices may be regarded as unfair;
- looks at the potential consequences for businesses which use unfair terms or notices; and
- contains example situations and flow charts and, in Annex B, a list of what is new.
What does this mean for you?
The guidance runs to 144 pages but much of it revisits already familiar ground. The CMA is at pains to point out that it does not think even the inclusion of notices in the unfair terms regime is a major change because the OFT previously took the view that notices could be considered to fall within the scope of the Unfair Contract Terms in Consumer Contracts Regulations under certain circumstances. The CMA does, however, acknowledge that this area is much clearer under the CRA and goes in to some detail on the issue of what is covered.
The guidance is also helpful on the issue of transparency and fairness which, we are reminded, also applies to notices and terms in relation to free as well as paid for digital content (unlike much of the CRA). Lawyers should take note that “legal precision alone will not suffice to meet the transparency test” and it is underlined that exclusion clauses which refer to statute (e.g. “the trader’s liability is limited to the extent permitted by statute”, without an explanation of what the relevant statutory provision says, are unlikely to qualify as transparent : “it is not sufficient just to name or allude to the relevant legal provisions – consumers must be put in a position of being able to understand their effects”.
Annex A is a useful point of reference for examples of unfair clauses which are considered by clause type and the guidance also incorporates recent case law.