Unfair Terms In Consumer Contracts – About Time For A ‘Health Check'?

The European Commission has recently actively confronted behaviours of large multinationals which it views as threatening the rights of European consumers. With this more aggressive European stance, and with ample consumer regulatory powers under current Irish legislation allowing scope for interventionist action, companies need to be mindful of compliance and the potential repercussions of terms and conditions included in contracts with consumers.

Irish Law

The European Communities (Unfair Terms in Consumer Contracts Regulations) 1995 (as amended) (the "Regulations") regulate contracts between consumers and businesses, such that businesses do not have absolute freedom to include any and all contractual terms in their interactions with consumers.

The Regulations require that contractual terms be "fair" and prohibit terms which cause a significant imbalance in the position of the consumer, when compared to the position of the business. In making this assessment, a court will have regard to the circumstances in which the contract was concluded and the nature of the goods or services being provided.

This fairness requirement applies only to contractual terms which are not "individually negotiated" by the business and the consumer. In addition, it does not apply to terms that form the very subject matter of the contract which are expressed in plain language.

While these are important carve outs from the Regulations, it is important for businesses to be aware that Irish, and indeed UK courts, have not always been consistent in interpreting the scope of the Regulations. In particular, the Irish courts have recently adopted contrasting approaches on whether mortgage terms come within the scope of the Regulations.

European Law and Developments

The Irish Regulations were introduced following the European Directive on Unfair Terms in Consumer Contracts (the "Unfair Terms Directive"). In April 2018, the European Commission published proposals to amend the existing Unfair Terms Directive to include provisions allowing for national penalties for the inclusion of unfair terms in consumer contracts. The proposed amendments will include prescriptive guidance on the calculation of such penalties at a national level, including a requirement to take into account the seller's annual turnover and net profits, and any previous violations on an EU wide level.

Under the ambit of the Consumer Protection Cooperation Network which brings together consumer authorities...

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