Tests to consider when drafting consumer contracts – fairness and transparency

Plain and intelligible language

When drafting any type of consumer contract, this must be in plain and intelligible language in order to comply with the transparency requirement under the Consumer Rights Act 2015. The contract must also contain terms which are deemed ‘fair’ to the consumer, otherwise a trader or business who prepares the contract risks those terms not being binding against the consumer.

Transparency requirement

Under the Act there is a general requirement that written terms of a consumer contract must be transparent.

The Act also states that terms should not only make grammatical sense to the average consumer but must put the consumer into the position of being able “to evaluate, on the basis of clear, intelligible criteria, the economic consequences for him which derive from the term.”

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The transparency requirement is all about how far the consumer can foresee and evaluate, at the time of conclusion of the contract, the consequences that their rights and obligations may have in the future. The trader or business must ensure that where complex or technical issues are included, the consumer is given sufficient information to ensure it understands the terms used and the practical implications of those complexities or technicalities.

A few practical suggestions to ensure a trader stays on the right side of the transparency requirement include:

• Ensuring adequate visual presentation, i.e font size
• Structure the contract in a logical way and ensure the important terms are not hidden amongst other provisions
• If contract terms can only be understood when reading them jointly, present those terms together and ensure that these are not placed in different parts of the contract.

Failing the transparency test alone (independently of the fairness test) does not make a term unenforceable against an individual consumer. However, if a term is ambiguous, it should be given the meaning that is most favourable to the consumer.

Fairness test

The Act defines a term as ‘unfair’ if It is contrary to the requirement of good faith or it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.

When considering what is meant by ‘good faith’ the courts have alluded to the elements of “fair and open dealing”. Terms should be “expressed fully, clearly and legibly, containing no concealed pitfalls or traps.” A trader should not take advantage of the consumer’s circumstances to their detriment, including any inexperience in negotiations and the consumer’s potentially relative unfamiliarity with the subject matter of the contract.

When assessing fairness, the following will be taken into account:

• The nature of the subject matter of the contract
• Reference to all the circumstances existing when the terms were agreed.

The courts may also take into account whether the consumer has received legal advice. However, this does not necessarily put consumers on equal footing in terms of bargaining power or level of knowledge as against a trader or a business – terms must still be assessed for fairness, especially if the consumer ends up contracting on the trader’s standard terms.

If a term or terms are deemed “unfair”, they are not legally binding on the consumer. If there is doubt about a written term, the interpretation that is most beneficial to the consumer will prevail. A consumer who has been misled by a trader may also have a number of remedies under the Misrepresentation Act 1967.

For any further advice in this area, please contact Dan De Saulles on 01905 744 856 or [email protected].