With the introduction of the Consumer Rights Act 2015 (CRA) at the beginning of October fast approaching, the Competition and Markets Authority (CMA) has produced revised guidance on unfair terms (replacing the Office of Fair Trading guidance adopted by the CMA) (Guidance). The Guidance takes account of both the statutory changes being introduced by the CRA and of recent case law on unfair terms, and aims to enable businesses to ensure that their contract terms and notices are clear to consumers.
The CRA deals with a range of matters (not all directly relevant to contract terms). However, one of its main purposes is to give effect in the UK to the Unfair Contract Terms Directive. This is achieved mainly in Part 2 of the CRA, which replaces the Unfair Terms in Consumer Contracts Regulations 1999. The Guidance aims to give a comprehensive account of the CMA’s understanding of Part 2 of the CRA, and offers detailed suggestions as to how businesses using contract terms and notices with consumers can seek to achieve compliance with the CRA.
In summary, the Guidance:
- explains the fairness and transparency tests in Part 2 of the CRA
- considers the exemptions from the assessment of fairness
- considers contract terms and notices which are always unenforceable under the CRA independently of the fairness test (some of these provisions are found in Part 2 of the Act but most are in Part 1)
- explains why the CMA considers that certain kinds of terms or notices may be regarded as unfair
- considers the consequences for businesses using unfair terms or notices
The Guidance is contained in a number of documents including:
- Short guidance – this provides a simplified overview of unfair terms and includes a flowchart to help firms consider whether a term might be unfair. Read the short guidance on the gov.uk website (PDF).
- Intermediate guidance – this provides more on when the unfair terms regime might apply, the test of fairness, the test of transparency, blacklisted terms and ‘grey’ terms that the CMA might consider unfair. Read the intermediate guidance on the gov. uk website (PDF).
- Detailed guidance – this replaces the old OFT311 guidance and gives a more detailed explanation of the CMA’s views of the unfair terms regime and includes some practical suggestions on how firms can achieve compliance. Read the detailed guidance on the gov.uk website (PDF).
The detailed guidance includes 2 annexes:
Annex A: this reproduces historic examples of terms which the OFT considered might be indicative of unfairness and which may still be useful for firms. Read Annex A on the gov.uk website (PDF).
Annex B: this provides a non-exhaustive summary of the new elements of unfair terms law that the CRA contains and refers to the corresponding paragraphs in the detailed unfair terms guidance. Read Annex B on the gov.uk website (PDF).
From 1 October 2015, specific sector unfair terms guidance produced by the OFT will no longer be adopted by the CMA (and the Financial Conduct Authority has already withdrawn its guidance from January 2012). Instead, the CMA will consider “from time to time” whether there is a need for it to produce specific guidance in a particular sector.