is crucial. These rules, often outlined in Terms and Conditions (T&Cs), need to be done right – presented correctly, at the right time, and definitely without any blacklisted, grey-listed, or otherwise unfair terms.
Unfair terms hold no legal sway when it comes to consumers, and businesses using them put themselves at risk of significant repercussions. This includes regulatory scrutiny, substantial fines, civil or criminal liabilities, and harm to their reputation. In this article, we'll explore unfair contract terms in online Business-to-Consumer (B2C) contracts, highlighting different examples under European Union (EU) and United Kingdom (UK) laws.
- Unfair T&Cs – Black List and Grey List
Under EU and UK consumer laws, a term in a contract is deemed unfair if it creates a substantial imbalance in the rights and obligations between the parties, to the disadvantage of the consumer. The law identifies certain 'blacklisted terms,' automatically deemed unfair if present in a contract. It also provides an indicative 'grey list' of terms that, while not automatically unfair, may be considered by a court when evaluating overall fairness.
The Black List: this includes contract terms that are inherently unfair and are automatically deemed as such. Examples of these terms include:
- Excluding liability for death or personal injury: a term that excludes or limits the liability of a business when a consumer dies or suffers serious injury due to their actions/omissions.
- Mandating payment for products/services not provided: this refers to a contract term that compels a consumer to pay the full price for products or services, even when those goods were not delivered or the services were inadequately provided.
- Shifting the burden of proof onto the consumer: according to consumer law, for a certain period, often up to one or two years following delivery, the buyer will not need to prove that the product was faulty; the burden of proof is reversed in favour of the consumer. Accordingly, sellers cannot shift this burden in their T&Cs, as consumer protection regulations safeguard the buyer from such contractual imbalances
- Disproportionate sanctions for breach of contract: this involves imposing excessively severe penalties for breaches of contract, especially those of a financial nature. An example would be a contract clause specifying that, in the event of a minor breach, the consumer is obligated to pay a penalty far surpassing the actual contractual value.
- Granting the seller exclusive interpretation rights regarding a contract term: giving the business exclusive rights to interpret any contract term.
- Shorter notice period for the seller: a term where the business has a shorter notice period to terminate the contract compared to the consumer.
- Designating exclusive jurisdiction to the courts in the seller's location: specifying exclusive jurisdiction in the seller's local courts, unless the buyer is also based there.
- Hindering or preventing customers from taking legal action: this can occur by removing or restricting the customer's right to redress when the business is at fault. It also includes wording that allows for excessive and unexpected financial or other burdens to be imposed on the customer.
- Imposing costs for arbitration: a term that obliges the consumer to cover their own expenses for arbitration.
The Grey List: consumer law outlines terms that may be unfair, detailed in a 'grey list'. Inclusion does not conclusively determine a term as unfair; it requires an assessment based on specific wording and effect. The 'grey list' includes terms such as:
- Limiting a consumer's legal rights when the seller fails to perform: a term that prevents/limits a consumer's legal rights when a business does not/inadequately performs their contractual obligations. For example, a provision that excludes or limits the buyer's right to compensation in the case of non-delivery by the seller.
- Excluding or limiting the seller's liability in the event of the buyer's injury or death due to the seller's actions or omissions: a term that exempts or restricts the seller's liability when the buyer suffers injury or death due to the seller's actions or omissions.
- Requiring excessive advance payments or providing excessive guarantees on the performance of future obligations: a term where the consumer has to make disproportionately high advance payments or offer excessive guarantees for future obligations.
- Allowing a business to end a contract of indefinite duration without reasonable notice: a term that permits a business to terminate a contract of indefinite duration without providing reasonable notice, except under serious grounds.
- Authorizing the seller to retain pre-payments (e.g., deposits) if the buyer cancels but not providing compensation if the seller cancels: a term allowing the seller to keep pre-payments, like deposits, if the buyer cancels but not requiring compensation if the seller cancels. For example, stating that if the buyer cancels the order, the seller retains the full pre-payment. However, if the seller cancels, no compensation or refund is provided to the buyer
- Empowering the seller to unilaterally change contract terms without the buyer's agreement and without a valid reason: a term giving the seller the authority to unilaterally modify contract terms without obtaining the buyer's agreement and without a valid reason.
The examples given are not an exhaustive list but rather depictions of unfair terms that should either be excluded from your Terms and Conditions (T&Cs) or approached with caution, as in the case of the grey list. As noted, unfair terms simply don't hold up when it comes to dealing with consumers, and using such terms can result in significant fines, legal complications, and damage to your company's reputation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
