In Jana Perenicova and another v SOS financ spol. s.r.o. (CJEU) (C-453/10), the Court of Justice of the European Union has considered whether a contract is invalidated if it contains unfair terms or was obtained by unfair commercial practices.
A lender—SOS financ spol. s.r.o—provided a loan to a Slovak consumer by way of a standard loan agreement. The agreement at issue contained an erroneous annual percentage rate (APR) and other contract terms that the consumer claimed were unfair. As a result, the consumer asked the national court to declare the entire agreement invalid. The court stayed the national proceedings and asked the CJEU to provide guidance in respect of whether i) an agreement should be invalidated if it contains unfair terms and invalidating it would benefit the consumer; and ii) an agreement should be invalidated if an unfair commercial practice is found.
The CJEU held that national courts must first, use national law principles to assess whether there are unfair contract terms in a consumer contract and second, assess objectively whether a contract can continue without its unfair terms, rather than simply declaring the whole contract invalid, as that would result in a more advantageous position for the consumer.
However, a finding of an unfair commercial practice does not necessarily justify a finding of unfair contract terms, therefore also has no effect on the validity of the contract.
The CJEU also held that EU Member States are permitted to pass national legislation providing a higher level of consumer protection than that provided by the Unfair Terms Directive (1993/13/EC). This could include legislation invalidating entire consumer contracts that contain unfair terms.
This CJEU decision clarifies that a finding of unfair commercial practices does not mean automatically that the relevant contract contains unfair contract terms, and that a finding of unfair terms does not necessarily invalidate the entire contract. It has now also been expressly confirmed by the CJEU that it is up to national legislators to set higher standards of consumer protection, if considered necessary.