Guide to Unfair Terms in Contracts
Consumers buying from businesses based in Ireland or the EU have strong consumer rights. This page covers your obligations to consumers on the terms in your contracts. From 28 November 2022, these rights have been extended to a wider range of contracts as part of the Consumer Rights Act 2022, including,
- standard contracts that you use for all your sales
- contracts that a consumer negotiates with you
- contracts where the consumer did not pay you anything, for example, where the consumer provides their personal data for a social media account as part of the service
This page is not legal advice. To fully understand the legal obligations that apply to your business, you should seek independent legal advice.
Consumers may not be able to negotiate or understand contract terms, making them the weaker party in a contract. To reflect this, consumer law puts transparency requirements on businesses and protects consumers against unfair terms.
Consumer law outlines that a contract term is unfair when it:
- causes a significant imbalance in rights and obligations, where the consumer is at an unfair disadvantage to the business
- does not adhere to the requirement for good faith
A consumer cannot be bound by an unfair term in a contract. A contract does not automatically end when it has an unfair term. If the operation of the contract does not completely depend on the offending term, then that term is ignored unless the consumer wishes to rely on the term. The rest of the contract will continue to be legally binding.
Consumer law requires that a contract is transparent. This means that:
- it is written in plain and understandable English
- the terms are clearly presented and are not hidden in the small print
- new or complex terms are brought to the consumer’s attention
- the cost implications of any term are clearly explained, for example, cancellation charges
A business must also give consumers adequate time to review a contract they are agreeing to. If there is a dispute about transparency it is up to the business to prove that they acted in a transparent manner.
Certain terms that cannot be assessed
Consumer law outlines that some terms cannot be assessed for unfairness. These are terms that:
- are core terms – for example, the main subject matter or purchase price
- a consumer negotiated with the business
- are a legal requirement
These terms are only exempt if they meet the transparency requirements and are not on the black (terms that are always unfair) or grey (terms that maybe unfair) list of unfair terms. Other aspects of consumer law will apply to those terms.
Contracts that consumer law does not apply to
Consumer law on unfair terms does not apply to the following contracts:
- business to business contracts
- consumer to consumer contracts
- employment contracts
- contracts on succession rights
- contracts on rights under family law
- contracts on the incorporation of companies or partnerships
- terms which reflect mandatory, statutory or regulatory provisions in Ireland
Consumer law outlines how to test terms that may be unfair. The test is based on the principles of good faith and transparency.
Good faith looks to good standards of commercial practice and morality. It includes:
- fair dealing by a business with a consumer. This means that a business does not take advantage of a consumer’s:
- need for a particular product/service
- lack of experience
- weak bargaining position
- open dealing by a business with a consumer. The means the terms in a contract should be:
- in plain intelligible language that an average consumer can understand
- available in one location and identifiable as the terms of the contract
- expressed fully, clearly and legibly with no hidden ‘small print’
The following are considered when assessing good faith:
- the strength of the bargaining position of the parties
- whether the consumer had an inducement to agree
- whether the goods/service was personalised for the consumer
- the extent to which the business has dealt fairly with the consumer
- whether the business took the consumer’s legitimate interests into consideration
This means a term should not give a significant advantage to a business without providing an equal benefit to a consumer. When deciding if a significant imbalance exists in the contract, all of the contract and the circumstances of its agreement are considered. If other terms significantly benefit the consumer, they may prevent a term being declared unfair.
Terms that are always unfair
Consumer law says that certain terms that are automatically unfair. This means that an unfairness assessment is not required for these terms. These terms are commonly known as the ‘Black list’.
- A term that excludes or limits the liability of a business when a consumer dies or suffers serious injury due to their actions/omissions
- A term that requires a consumer to pay for goods/services they did not receive
- A term that imposes a burden of proof on a consumer that the law says should be with a business
- A term that prevents or hinders a consumer’s right to take a legal action or exercise a legal remedy. including by requiring the consumer to take disputes to arbitration that is not governed by law
- A term that requires a consumer to bear their own costs for arbitration
- A term that gives a business the exclusive right to decide that goods/services conform to the contract
- A term that gives a business the exclusive right to interpret any contract term
- A term where the business has a shorter notice period to end the contract than the consumer
- A term that grants exclusive jurisdiction for contract disputes to a court where the business is based even though the consumer does not live there
Terms that may be unfair
Consumer law outlines terms that may be unfair, which are detailed in a ‘Grey list’. Consumer law requires that an assessment is carried out to determine if these terms are unfair. The ‘Grey list’ is intended as a guide to the terms that may be unfair. It should not be regarded as a complete list of the contract terms that may be unfair.
- A term that prevents/limits a consumer’s legal rights when a business does not/inadequately performs their contractual obligations
- A term that makes an agreement binding on the consumer but providing the goods/services by the business is subject to a condition whose realisation depends on the businesses will alone.
- A term where a business can keep payments from the consumer when they end the contract but if the business cancels the contract, the consumer will not receive the same type of compensation
- A term where the consumer must pay the business a high level of compensation for goods/services they have not supplied when the consumer ends the contract
- A term where the consumer must pay the business a high level of compensation when they do not meet their contractual obligations
- A term where a business can end a contract on a discretionary basis but the same option is not available to the consumer
A term where a business can keep payments for goods/services that the consumer has not received when the business ends the contract
- A term where a business can end a contract of indefinite duration without reasonable notice, except when there are serious grounds for doing so
- A term when the consumer ends the contract that allows a business to keep a payment due to a third party as part of a contractual obligation or mandatory statutory/regulatory provision
- A term that automatically extends a contract of fixed length when the consumer does not say otherwise, where there is an unreasonably early deadline for the consumer not to extend the contract
- A term that binds the consumer to terms they had no real opportunity to understand fully before the contract was agreed
- A term that allows a business to alter the terms of the contract without a valid reason, which is specified in the contract.
- A term that allows a business to alter any characteristics of the goods/services covered in a contract without a valid reason
- A term where a business can decide the price after the consumer has agreed the contract where no price, or method of determining the price, has been agreed with the consumer before the contract is agreed
- A term that allows the price to be decided at the time of delivery or supply
A term where the business can increase the price without giving the consumer the right to cancel the contract if they decide that the price rise is too high
- A term that limits a business’s obligations for commitments provided by their agents makes the business’s commitments subject to compliance with a particular formality
- A term where the consumer has to fulfil all their obligations, when the business does not perform their obligations
- A term where a business can transfer contractual rights and obligations that may reduce the consumers guarantees, without the agreement of the consumer
- A term that requires a consumer to pay a fee to exercise a statutory right
- A term where the consumer must have a valid reason before they can obtain repairs or spare parts from another business
- A term that imposes disproportionate requirements on the consumer when they want to end a contract
- A term where the consumer has to make excessive advance payments or provide excessive guarantees on the performance of future obligations
- A term that restricts the information the business provides to the consumer on the performance of the contract
- A term that requires the consumer to restrict their rights as data subject under the Data Protection Acts 1988 to 2018, or the General Data Protection Regulation
Role of the CCPC
The CCPC can decide if a term in a consumer contract is fair or unfair. The use of a Black or Grey List term is a prohibited act, as is the use of non-transparent terms.
When we decide that a term is unfair we can apply to the courts for a declaration that it is unfair. A declaration is a legally binding decision that can only be made by a court. We can also apply for an injunction to prevent a business using a contract term that we think is unfair. When a court makes this decision, the term is no longer allowed to be used. The CCPC and other authorised bodies publish court orders/declarations of unfair terms on their websites.
A business who enters into a new contract with a consumer using a term that was declared unfair, or tries to enforce that term in a contract, is committing a criminal offence.
Outside of a court, the CCPC can accept a written undertaking from a business not to use an unfair term. If a consumer has lost out because of an unfair term, the CCPC can make the business compensate them by taking the business to court.