Commission Lists Unfair Terms in ISP Agreements

Unfair Clauses
Potential Implications

On January 31 2003 the Unfair Terms Commission published Recommendation 03-01, which lists 28 clauses in internet access agreements between internet service providers (ISPs) and consumers or non-professionals which the commission deems to be unfair under Article L 132-1 of the Consumer Code.

Unfair Clauses

The recommendation deals separately with clauses it deems to be unfair in all internet access provision agreements, and those which are unfair only if the consumer or non-professional pays the ISP for its internet access services.

The main clauses which are deemed to be unfair in all internet access agreements are those that:

• derogate from legal rules on jurisdiction (for further information please see the "Overview (November 2002)");
  
  
• state that general terms of service posted online prevail over printed general terms of service;
  
  
• extend the consumer's liability for the unauthorized use of lost or stolen identifiction or passwords until a certain amount of time after the ISP is notified of a loss or theft;
  
  
• establish excessively short time periods in which the consumer must make claims against the ISP arising from events for which the ISP is liable;
  
  
• exonerate the ISP from liability or excessively limit its liability for violation of its contractual obligations, as well as defining force majeure more broadly than under French civil law; and
  
  
• make the consumer liable for all damages that the ISP may be ordered to pay to a third-party claimant arising from the use of the service, as well as for expenses arising from a defence in connection with that claim.
  

The second category of clauses deemed to be unfair, which is limited to internet access provision agreements requiring payments by consumers or non-professionals to the ISP, principally includes clauses that:

• entitle the ISP to modify unilaterally the offered service without the consumer's express consent (except where allowed by law);
  
  
• entitle the ISP to modify unilaterally the amount of the service fees in fixed-term agreements without the consumer's express consent, even if the consumer is given an opportunity to terminate the agreement;
  
  
• limit all obligations of the ISP to best-effort obligations;
  
  
• relieve the ISP of its obligation to ensure access to the offered service in the event of a breakdown;
  
  
• allow the ISP to terminate the agreement in the event of the consumer's breach of "imprecise" obligations (eg, "abnormal use of service"), or following the consumer's refusal to pay, even if such refusal is justified;
  
  
• make the consumer liable for both liquidated damages and normal damages in the event of termination of the agreement for breach by the consumer; and
  
  
• provide that notices sent by email are effective after an excessively short period of time has lapsed, even if the consumer did not consult them, thus obliging the consumer to consult emails unreasonably frequently.

The recommendation is based on the Consumer Code, which defines 'unfair terms' in contracts between professionals and consumers or non-professionals as:

"terms, the purpose or consequence of which is to create a significant imbalance between the rights and obligations of the parties to a contract to the detriment of a non-professional or a consumer."

This definition is in line with the provisions of the Directive on Unfair Terms in Consumer Contracts (93/13/EEC). However, while the directive only applies to consumers, the provisions of the French law also apply to a broader category of non-professionals. According to recent French case law, a 'non-professional' is a professional who concludes a contract for the purchase of goods or services which are not directly related to his or her professional activity.

Potential Implications

The commission's list is only a recommendation. It is not binding on the ISPs or on the courts. Nevertheless, experience has shown that recommendations of the Unfair Terms Commission influence the French courts and are generally indicative of the direction that the courts will take in the event of litigation over internet access provision agreements in the coming years.

This does not mean that ISPs must strike all of the clauses on the commission's list from their contracts. If a specific clause is challenged as unfair, a French judge must determine whether the specific clause "creates a significant imbalance between the rights and obligations of the parties to a contract to the detriment of a non-professional or a consumer", taking into account "at the time of conclusion of the contract, all circumstances related to the conclusion of the contract, as well as all other clauses of the contract".

During court proceedings, the consumer must provide evidence of the unfair nature of the relevant clause. Examples of clauses held to be unfair by the courts include a professional's right to terminate unilaterally an indefinite duration contract without cause and without notice, or to change unilaterally contract terms without a valid basis specified in the contract. In both situations the clause deemed to be unfair was declared null and void. However, the remainder of the contract will normally continue to apply if the contract can survive without the unfair terms.

According to the French ISPs Association, the recommendation is based on clauses of internet access provision agreements used in 1999, which have significantly evolved since that time. In the association's opinion, almost 75% of the findings of the recommendation are either already applied by the members of the association or could be applied without difficulty. The findings of most concern to members are those relating to online amendment of the terms of service and termination of the agreement in the event of consumer abuse.

Therefore, in light of the recommendation, ISPs offering their services in France should review their internet access provision agreements in order to determine whether their standard conditions contain clauses singled out by the commission. The reasonableness and necessity of such clauses should then be determined within the full context of the contractual relations between the ISP and its non-professional and consumer customers. This determination must strike a balance between the legal and operational constraints of the ISP.

For further information on this topic please contact Bradley L Joslove or Andréi Krylov at Franklin by telephone (+33 1 45 02 79 00) or by fax (+33 1 45 02 79 01) or by email ([email protected] or [email protected]).