Terms to avoid when drafting consumer contracts

Black and grey listed terms

What must you avoid (the black list) when drafting a consumer contract and what should you avoid (the grey list)? If you are reviewing or renewing your contracts for the supply of goods, services and digital content in business-to-consumer transactions, read on – we deal here with contracts between consumers and traders.

To be clear about the terms we use, a consumer is an individual acting for purposes which are wholly or mainly outside that individual’s trade, business, craft or profession. A trader is a person acting for purposes relating to that person’s trade, business, craft or profession, whether acting personally or through another person acting in the trader’s name or on the trader’s behalf.

In consumer contracts, black list terms or terms that are unfair are not binding against a consumer. Terms that would produce the same effect as the blacklisted term, for example, by preventing an obligation arising for the trader in the first place, or putting procedural obstacles in the way of consumers enforcing their rights and remedies, are also blacklisted.

Black list terms

These include

• Exclusion or restriction of liability for death or personal injury, whether by act, omission, or negligence
• Prevention of a consumer invoking statutory or common law rights or making it more difficult to do so
• In the case of the supply of goods or digital content, the exclusion of terms implied by the Consumer Rights Act 2015 (sections 9-17,28,29, 34-37, and 41)
• In the case of the provision of services at a discount, exclusion of liability for items listed in the same Act at sections 49-53
• Exclusion of liability for fraud or fraudulent representation
• Terms that are considered to be actually (as opposed to potentially) unfair.

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Unfair terms here are those that are contrary to the requirement of good faith or cause a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.

On the other hand, good faith means fair and open dealing. Terms must be clear and legible and not conceal potential traps, and not take advantage of a consumer’s circumstances to their disadvantage.

Grey list terms

In essence, these are terms that are potentially black list terms, i.e unfair on the face of it, but the particular circumstances of the contract are such that they are not unfair.

An example is a term which has the object or effect of enabling the trader to alter the terms of the contract unilaterally without a valid reason which is specified in the contract. If the trader has an obligation to its supplier, and that supplier has to observe an industry-wide statutory framework that may be amended from time to time, the trader may need to protect itself from the effect those amendments may have on its own ability to perform its obligations to the consumer.

In those circumstances, it is possible that the trader’s right unilaterally to amend the contract with the consumer may be lawful. This is particularly relevant to utility and telecommunications contracts.

These provisions should be avoided or at the very least (in the case of grey list items) carefully considered because they are specifically addressed by statute.

However, the duty of the contract drafter extends beyond that to the provision of more general commercial advice to their trader client to ensure:

• compliance with wider legal considerations
• compliance with industry-specific requirements
• the creation of a framework within which the underlying bargain is to be performed.

In other words, these terms should never be considered in isolation.