What is an unfair term?

An unfair term in a contract covered by the UTCCRs is not binding on the consumer.

Test of fairness

A term is unfair if:

contrary to the requirement of good faith it causes a significant imbalance in the parties' rights and obligations under the contract, to the detriment of consumers.

'Good faith' means that you must deal fairly and openly with consumers. Standard terms may be drafted to protect commercial needs but must also take account of the interests and rights of consumers by going no further than is necessary to protect those legitimate commercial interests.

The plain language requirement

According to the UTCCRs, a standard term must be expressed in plain and intelligible language. A term is open to challenge if it could put the consumer at a disadvantage because he or she is not clear about its meaning - even if its meaning could be worked out by a lawyer. If there is doubt as to what a term means, the meaning most favourable to the consumer will apply.

What terms are not covered?

Most standard terms are covered by the UTCCRs. The exceptions are those:

• that reflect provisions which by law have to be included in contracts
• that have been individually negotiated
• in contracts between businesses
• in contracts between private individuals
• in certain contracts that people do not make as consumers – eg, relating to employment or setting up a business
• in contracts entered into before 1995.

Terms setting the price or defining the product or service

Terms in consumer contracts which set the price or define the product or service being supplied are 'core terms' of the contract and are exempt from the test of fairness as long as they meet the plain language requirement.

More information

For more details of what the OFT considers to be unfair terms, see our range of guidance.

Back to: Unfair Terms in Consumer Contracts