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Avoiding Unfair Terms in Sales Contracts

There are strict rules on using unfair terms in sales contracts (including consumer and business contracts). They fall under the Unfair Contract Terms Act and Unfair Terms in Consumer Contracts Regulations.

All standard sales contracts that businesses make must be ‘fair’. It would not be possible to enforce contractual agreements that are ‘unfair’.

You must express standard terms in plain, intelligible language. Even so, the specific rules on what is fair, differs for:

  • Consumer contracts
  • Consumer notices (e.g. car park sign)
  • Business contracts

You must not try to relinquish your responsibilities. As the seller, you have a legal responsibility in most situations (e.g. selling faulty goods).

Note: Businesses have greater responsibilities towards their consumers than they do towards other businesses (e.g. in B2B marketing).

Implied Consumer Rights

As a rule, the regulations for sales of goods and services provide implied rights for almost all customers. Even so, there may be exclusions for legal contracts that state otherwise (details below).

Unfair Terms in Consumer Contracts

If you make unfair terms in a consumer contract you would not be able to enforce them. The same rules apply to unfair consumer notices, such as signs on a car park or on a shop wall. Likewise, there is no legal way to enforce terms or notices that attempt to avoid responsibility when:

  • Causing death or injury
  • Selling or supplying faulty goods (includes describing a product inaccurately)
  • Selling goods that you do not have permission to sell (e.g. stolen property)

Note: In some cases, the enforcement of terms or notices that try to remove someone’s responsibilities would also be unlikely for:

  • Delays
  • Failing to do what was already agreed
  • Unsatisfactory services

Setting a price higher than some other business charges does not make a sales contract unfair by itself. But, there are other ways that unfair contract terms may also be difficult for businesses to enforce.

You must avoid using a contract that weighs ‘significantly’ in favour of the trader, such as those that:

  • Allow the seller to increase an already agreed price at a later date.
  • Create unbalanced rights (e.g. enabling you to cancel a contract at any time but requires the customer to give ‘unreasonable’ notice).
  • Have an excessive cancellation charge and an automatic loss of all upfront payments.

Always write consumer contracts in plain language that are intelligible, do not mislead, and are not unfair.

If a Customer Makes a Complaint

As a rule, the courts would make a decision on the final outcome if a customer complains. They would determine whether a term used in the contract or in the wording in notices is unfair.

The Competition and Markets Authority (CMA) can take businesses to court. The local Trading Standards office may also stop the usage of using unfair terms or notices.

Note: The risk of challenges and legal action taken by consumers is another reason to avoid unfair terms in sales contracts. Official guidance on unfair contract terms (CMA37) explains how to ensure contract terms and notices are fair and clear to consumers.

Unfair Terms in Small Business Contracts

There are certain situations in business where you must not try to claim you are free of responsibility. Thus, you must not try to avoid responsibilities by the use of an unfair contract in cases involving:

  • Someone’s death or injury (applies to all circumstances).
  • Losses caused by someone’s negligence (unless considered ‘reasonable’).
  • Poor quality or defective goods (unless considered ‘reasonable’).

What the Courts Consider as Reasonable

As a rule, a ‘reasonable’ situation would be a consideration for the courts to determine. In doing so, they would take certain things into account, such as:

  • What information was available to both parties when drawing up a contract.
  • Whether it was a standard contract or something ‘negotiated’.
  • Whether the buyer had an opportunity to negotiate better terms.

Customer Implied and Statutory Rights

Certain types of implied rights apply for customers when buying goods or services. In fact, some customer implied rights also fall under ‘statutory rights’ in United Kingdom.

Implied Rights on Products

As a rule, the implied rights that apply to products mean they must:

  • Be as stated in the description.
  • Be of satisfactory quality (e.g. free of defects, safe, and in good working order).
  • Be fit for the intended purpose and capable of doing what the customer asked for.

Some consumer implied rights also apply to contracts used in hire purchase agreements, when hiring, and in part exchanges. Even so, they always exist when consumers are buying goods. A sales contract cannot state otherwise and still be legal.

Implied Rights on Services

When it comes to services, the implied rights mean that the carrying out of such services must take place:

  • For a reasonable charge (unless an exact price has already been agreed).
  • With a reasonable amount of care and skill.
  • Within a reasonable time frame (unless a specific time has already been agreed).

You must always try not to deny the implied rights of a customer in a contract for services. Doing so means you would have difficulty enforcing such terms in a service contract.

Implied Rights on Business Contracts

Some implied rights also exist for business to business customers (B2B). Exceptions may apply if a legal contract states otherwise and a court would treat it as ‘reasonable’.

Avoiding the Use of Unfair Terms in Sales Contracts in United Kingdom