Do You Know If Your Contract Terms Are Unfair?

We take a look at the CMA's latest research into unfair contract terms, and what you can do to spot them.

Unfair contract terms legislation has been around since 1977, but the Competition and Markets Authority (CMA) believes over half of business still don't know the rules very well.

And no, the CMA's sample wasn't just filled with new businesses: 65% had been around for over 10 years.

only 46% of businesses said they knew unfair contract terms well 18% didn't even know what an unfair contract term was the smaller and newer a business was, the less likely it understands the unfair terms regime. This is a particular risk for the Fintech world, with its new entrants and bootstrappers with varying levels of legal experience.

Of the 46% who claimed to know what they were doing, only 15% were familiar with the Consumer Rights Act 2015 (CRA). Of course, many people may be aware of the consumer law that applies to them without knowing the source (though it helps).

The current rules

The CRA came into force in October 2015. It pulled together a patchwork of consumer protection legislation, including on unfair terms, and refreshed it in the process.

The CMA published very helpful and detailed guidance on unfair terms in July 2015 but, at 144 pages long, they can hardly be surprised that it's not on everyone's nightstand.

Still, unfair contract terms - whether you're aware of the law or not - are completely unenforceable and could leave major dents in your business' reputation.

What are 'unfair terms'?

Unfair contract terms fall into two broad categories - those in the 'black list' and those in the 'grey list'.

A blacklisted term is always unfair. There is a list of them on page 51 of the CMA's guidance, and includes examples like excluding liability for death caused by your negligence.

A greylisted term has the potential to be unfair, depending on the circumstances. There's around 60 pages of guidance on these alone, but the CMA's report summarised eight behaviours most likely to involve unfair terms:

Taking deposits or advance payments. Limiting the extent you are liable if things go wrong. Making customers agree to privacy or data use. Making changes (e.g. to prices) once you have started dealing with customers. Customers filling out paperwork when changing arrangements. Where customers might have to pay cancellation charges. Rolling contracts with customers that auto-renew. Applying charges etc. if customers counter their agreement. The CMA found...

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