In my previous article I considered part 1 of the Consumer Rights Act 2015 , which seeks to re-enact and build upon the consumer protections that exist in relation to the sale and supply of goods and services to consumers. This article will concentrate on part 2 of the 2015 Act which deals with unfair terms in consumer contracts.
Part 2: Unfair Contract Terms
Part 2 of the Act seeks to re-codify and modernise the existing provisions which provide protection in relation to unfair terms, most importantly those currently found within the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999. Part 2 covers any contract between a consumer and a trader (excluding contracts of employment and apprenticeship) but also applies to any other notices relied upon by the trader which effect the rights and obligations between the parties or otherwise attempts to exclude liability. Part 2 also applies to any secondary contracts that attempt to vary the rights and obligations under the first contract, irrespective of whether or not the second contract is a consumer contract within the meaning of the Act.
Whether or not a term is unfair will be a question of fact for determination by the court, but the test to be applied is that a term is deemed to be unfair if it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer, taking account of the subject matter and/or nature of the contract concerned and all necessary circumstances. In order to assist, the 2015 Act contains at Schedule 2 a list of terms which may be deemed unfair. This list largely mirrors the list that was previously attached to the 1999 Regulations and includes (amongst other things) any term which has the object or effect of inappropriately excluding or limiting the legal rights of the consumer, a term that provides for the trader to be able to dissolve the contract on discretionary grounds without providing a similar right to the consumer, and a term which has the object or effect of automatically extending a fixed term contract where the consumer does not indicate otherwise.
It is worthy of note that the 2015 Act has retained the limitations of the existing unfair terms provisions in that a term which specifies the main subject matter of the contract cannot be assessed for fairness, nor can a term be challenged on the basis of the appropriateness of the price paid under the contract; the court will not interfere with a contract just because it represents a bad bargain to the consumer.
From a point of construction, if a term is capable of duel meanings then the meaning which is most favourable to the consumer must prevail. This of course may be somewhat of a double-edged sword for a consumer hoping to challenge a term as unfair. As with the previous legislation, if a term or notice is found to be unfair then that term will not be binding upon the consumer. If possible, the remainder of the contract will continue unaffected. However, notwithstanding the fact that the unfair term will not be binding as against the consumer, the consumer will be able to rely upon it as against the trader if he so wishes.
Finally, it is worth noting that pursuant to section 71, where a term of a consumer contract is in issue before the courts, the court must consider the fairness of that term even if the issue of fairness is not raised by any party, thus putting the fairness of a contractual term on a par with a defence of illegality.
From a procedural prospective, if a consumer considers that a term is unfair, he may pursue the matter through the courts. In addition, if the consumer’s complaint relates to a term which purports to exclude liability or falls foul of the requirement for transparency (section 68) he may complain to the relevant regulator. The procedure for such a complaint is found in Schedule 3 to the 2015 Act. In the event a relevant regulator agrees to consider a complaint, it must either make an application for an injunction providing for the removal or variation of the offending term in accordance with paragraph 3 of Schedule 3 or alternatively, notify the complainant that it does not intend to make such an application and provide reasons why. However, whilst this may appear to provide a straightforward avenue to enable a consumer to challenge a contractual term, the regulator maintains a discretion as to whether or not to consider the complaint at all and no reasons have to be given in the event that the relevant regulator decides not to consider the complaint. Accordingly, it is unclear at this time what level of involvement will be adopted by the regulators and/or whether or not the disparate regulators will adopt a uniform approach to the process of complaints handling. Therefore the usefulness of these provisions remains to be seen. In the event that a complaint is considered and an application made by the regulator, the court may grant an injunction on such conditions and against such of the respondents as it thinks fit, ordering the removal or variation of an offending contract term.
The key provisions of the Consumer Rights Act 2015 came into force on 1 October 2015 and apply (with limited exceptions) to consumer contracts entered into after that date.
 As defined in paragraph 8 of Schedule 3 to the 2015 Act and includes (amongst others) the Financial Conduct Authority, local weights and measures authorities, Gas and Electricity Markets Authority, Water Services Regulation Authority and most importantly the Competitions and Markets Authority.