The European Court of Justice has recently made a decision that has clarified certain provisions of the Unfair Contract Terms Directive (invoked via the Unfair Contract Terms Act), which applies to consumer contracts, with a review of supplier controlled price variation clauses.

Legislation prohibits the use of unfair terms in consumer contracts including the "grey list” in UCTA. This prevents the use of certain contractual terms that have the object of, or have the effect of:

  • Binding the consumer to a contract they didn’t have the chance to fully understand
  • Allowing a supplier to alter the conditions of the contract without a valid reason that is not specified in the contract
  • Allowing the supplier to increases its prices without giving the consumer the ability to dissolve the contract before the price rise

The ECJ held that, in relation to (c) above, merely referring to legislation that determines the rights and obligations of the consumer and supplier does not fulfil the suppliers’ obligation to inform the consumer of their rights. Simply informing the consumer of the price rise in good time does not excuse this lack of information. The ECJ held that the right of termination by the consumer due to a price rise was a fully exercisable right, not just theoretical.

On 12 June 2013 the UK Government published the draft Consumer Rights Bill which will amend existing legislation on unfair contract terms in consumer contracts. This means that terms that fall into the exceptions in the “grey list” may not be challenged if they are transparent and “prominent”. To achieve this the terms must be shown in such a way that the average consumer can be deemed to have become aware of them. Relying on the small print will not be sufficient and the terms must be written in clear intelligible language.

This new clarification from the ECJ should help to improve transparency and also make consumers more aware of price hikes and their rights in relation to them.