Unfair Terms in Consumer Contracts: a new ... - Law Commission

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(3) For contracts between a business and a consumer, the draft Bill combined UCTA and the UTCCR into a single unified regime to cover the whole of the UK; (4) For other contracts, the draft Bill preserved the existing law. 42 At present, UCTA has some limited effect on employment contracts and private sales between two consumers. The draft Bill restated these provisions. Consumer contracts 2.38 The current paper is only concerned with contracts which are made between a business and a consumer (consumer contracts). 2.39 For consumer contracts, the 2005 Report attempted to bring together the UCTA and the UTCCR in one coherent regime, using the same concepts and definitions. We did not intend to make any major policy changes, but where the two regimes differed we “rounded up”, so as to preserve the existing level of consumer protection. Unlike the UTCCR we did not simply copy out the UTD. Instead, we sought to explain the UTD in words which would be more familiar to a UK audience. 2.40 In 2005, we made the following recommendations: (1) There should be a common definition of a “consumer contract”, based on the definition in the UTD. (2) Terms which limit liability for death or personal injury, or which exclude basic undertakings about the quality and fitness of goods, should continue to be ineffective. (3) In claims brought by consumers, the burden of proof should lie on the business to show that the term is fair. This follows UCTA. Under the UTCCR, technically the burden of proof is on the consumer, though the European case law makes clear that the court can raise the issue of its own motion. (4) The legislation should include negotiated terms. At present, UCTA includes negotiated terms, while the UTCCR do not. We thought it was better to “round up” rather than “round down”. (5) There should be a single fairness test, based on UCTA. We thought that in substance the tests in UCTA and the UTCCR were identical, but the words of the UCTA test were more familiar to a UK audience. (6) The grey list should be re-written in clearer, simpler terms. Our new version is set out in Appendix B, together with the original Schedule. 42 See Part 9 of this Issues Paper. 16
(7) Preventive powers should be available for any breach of the new consumer regime. At present, preventive powers are available for breaches of the UTCCR, but not for UCTA. Our recommendation would give the OFT and the other qualifying bodies the right to take action against notices which purport to exclude business liability to consumers, but which do not have the status of consumer terms. (8) The exclusion for terms which reflect the existing law should be rewritten to reflect the UTD recitals. This means that the exemption would apply not only to terms which reflect mandatory provisions but also those which lead to “substantially the same result as would be produced as a matter of law if the term were not included”. 43 2.41 We still think these recommendations are correct. In Part 9 we set them out in more detail and ask whether consultees agree that the recommendations should be implemented as part of the Government’s programme to simplify consumer legislation. We also ask whether, as a matter of policy, we should attempt to implement the UTD in clearer simpler language, rather than simply copy it out. 2.42 Two other recommendations dealt with the exemption under Regulation 6(2) and are more controversial. In 2005 we recommended that: (1) The legislation should be amended to clarify that “plain, intelligible language” referred not only to the language used, but was a short hand for transparency. Under the draft Bill, a term would only meet the requirement if it was in reasonably plain language, legible, clear and available to the consumer. (2) Terms relating to the main subject matter of the contract or the price should only be exempt from review if they were part of the core bargain. Under the draft Bill, they were only exempt if they were substantially the same as the consumer reasonably expected. 2.43 Given that these recommendations relate to rules that have since been the subject of a major test case before the Supreme Court we discuss them in more detail in Parts 4 to 8. 43 We also recommended removing the exception in UCTA for cross border contracts for the sale of goods. We do not address it in this paper as it is discussed by BIS in their recent consultation paper: BIS, Enhancing Consumer Confidence by Clarifying Consumer Law (July 2012), p 24. 17
Page 1: Unfair Terms in Consumer Contracts:
Page 4 and 5: © Crown copyright 2012 ii
Page 6 and 7: CODE OF PRACTICE ON CONSULTATION Th
Page 8 and 9: TABLE OF ABBREVIATIONS ACL Australi
Page 10 and 11: 1.5 This paper, therefore, has two
Page 12 and 13: 1.14 Our main concern is the uncert
Page 14 and 15: (2) in particular to examine articl
Page 16 and 17: PART 2 OVERVIEW OF THE LAW AND THE
Page 18 and 19: Implementing the Unfair Terms Direc
Page 20 and 21: Terms must be fair 2.16 Under the U
Page 22 and 23: 2.28 In 2002, we noted that there h
Page 26 and 27: PART 3 THE PURPOSE OF UNFAIR TERMS
Page 28 and 29: None of you nowadays will remember
Page 30 and 31: 3.19 As a result of the investigati
Page 32 and 33: BEHAVIOURAL BIASES 3.27 In the last
Page 34 and 35: Behavioural biases and the UTCCR 3.
Page 36 and 37: 3.48 There is a clear difference, h
Page 38 and 39: PART 4 THE EXEMPTION: PREVIOUS RECO
Page 40 and 41: 4.10 The changes sought to reconcil
Page 42 and 43: Plain, intelligible language 4.19 W
Page 44 and 45: The definition of the main subject
Page 46 and 47: (1) Renewal commissions - terms whi
Page 48 and 49: Of course the theory is that the ty
Page 50 and 51: In my view those words involve no m
Page 52 and 53: 5.28 The Supreme Court overruled th
Page 54 and 55: the more closely related the paymen
Page 56 and 57: 5.50 Therefore, the Court concluded
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Page 60 and 61: 5.69 In 2010, the OFT noted that th
Page 62 and 63: 5.79 Despite this, the judge did no
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Page 68 and 69: Support for the decision 6.7 There
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HOW HAVE ENFORCEMENT BODIES INTERPR
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6.41 However, when we met the OFT a
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6.48 The case of Bankers Insurance
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PART 7 THE EUROPEAN CASE LAW 7.1 Th
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Correcting an imbalance 7.12 The CJ
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According to settled case-law, it i
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7.28 The finding that the omission
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Directive 93/13, a particular metho
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7.44 The leading case on the averag
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7.52 The list of just three factors
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e aware of the approach taken by th
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(d) readily available to any party
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PART 8 PROPOSALS FOR REFORM A NEW A
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(7) Little attempt to distinguish b
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8.20 In some cases, where the consu
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8.31 In a general challenge, the co
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(1) Permit the trader to retain sum
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Terms which give the trader discret
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8.65 On balance, we think that our
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The grey list 8.74 Article 3(3) of
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Example 3 - Lightfinger Lender In t
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Example 7 - Mr Dodgy Door Seller In
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It is particularly important, in or
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9.17 Do consultees agree that the n
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9.30 Do consultees agree that: (1)
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9.42 We discussed this in some deta
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NOTICES 9.54 UCTA covers contract t
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9.68 The first two protections also
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PART 10 LIST OF CONSULTATION QUESTI
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(1) In proceedings brought by indiv
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