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

Can one look at any aspects of a price term except its amount?
4.23 Finally, we considered whether the words of article 4(2) of the UTD meant that
“price terms” could never be considered for fairness, or whether it was only an
assessment of the “adequacy of the price” which was prevented.
4.24 As discussed in Part 2, the grey list states that price escalation clauses may be
unfair. There are two ways of interpreting the Schedule. One is to say that price
escalation clauses are not included within the article 4(2) exemption. They may
always be assessed for fairness. The other way is to say that a price escalation
clause may be assessed, but that assessment may not take into account the
“adequacy” or amount of the increase, as against the goods or services supplied
in exchange. One could, for example, say that a price escalation clause is unfair
because it allows the price to rise without giving the consumer a right to cancel
the contract, 29 but not that it was unfair because it permitted a large increase
which was disproportionate to the overall price of the contract.
4.25 We thought that it would be difficult to review the fairness of a price escalation
clause without considering its amount. A term permitting a small escalation may
be fair: a term permitting a large escalation may be unfair. It would be difficult and
artificial to assess the fairness of the term without taking into account the size of
the escalation. 30
4.26 We thought that it would be better to look at whether the price escalation clause
was presented as a main feature of the contract. If so, it should not be assessed.
It is more likely, however, to be an incidental term. If so, it would be assessable
for fairness, taking into account all relevant circumstances, including the amount.
THE 2005 RECOMMENDATIONS
4.27 In our 2005 Report we noted that most consultees agreed with the views
expressed in the Consultation Paper and we maintained the same position. 31
4.28 We thought that it was important to re-word the exemption to make it clearer
which types of terms fell within it. We made a distinction between the essential or
“core” bargain (which could not be assessed for fairness), and other terms (which
could be assessed). The “core bargain” depended on how the deal was
presented to consumers. The main subject matter and the price were both sides
of the same coin, and both had to be considered from the point of view of a
reasonable consumer. What would a reasonable consumer think they were
getting (the main subject matter) and what did they think they were paying (the
price)?
4.29 The issue is dealt with in clause 4 of the draft Bill. We said that our new clause
followed the substance of the UTD, as implemented in the UTCCR. However, we
thought that the words of the UTD needed more explanation, so we added some
gloss on what constituted a core term.
4.30 Clause 4 reads as follows:
29
Above, para 3.27.
30
Above, para 3.28.
31
Unfair Terms in Contracts (2005) Law Com No 292; Scot Law Com No 199, para 3.62.
35