In September, I wrote a blog post about the concept of good faith and whether it exists as a principle within English law. My general conclusion was that it did not, based upon a long line of authorities. However, I did acknowledge that there were a few exceptions to this rule. Today, I wanted to discuss one of more the most notable exceptions to this rule; the Consumer Rights Act 2015.
Consumer Rights Act 2015
The Consumer Rights Act 2015 (“CRA”) was a much lauded piece of legislation that was intended to grant further rights and protection to consumers from businesses who might otherwise attempt to exploit them. It is a large piece of legislation with over a hundred sections. All of the Act is useful, but the most ground-breaking sections are 61 to 76. These sections introduce the concept of unfair contract terms between consumers and businesses.
Unfair contract terms
The concept of unfair terms has existed in English law since the Unfair Contract Terms Act 1977 (“UCTA”). However, UCTA only limits circumstances in which businesses can contract out of liability for certain issues (e.g. personal injury or death). What is revolutionary about the unfair contract terms provisions within CRA, is that they introduce a power for Judges to weigh up the relative fairness of a term inside a consumer contract. This is a sweeping power that counters the existing principle of English law that courts will not interfere in a contract. In short, a court would usually refuse to save a party (whether they were a consumer or not) from a bad bargain. The provisions in CRA now allow the court to invalidate that bad bargain should it consider it fair to do so.
What is an unfair contract term?
The principle definition is included in s62(4) CRA, and this is where the good faith element comes in. An unfair term is described as a term which is “contrary to the requirement of good faith, it causes a significant imbalance in the party’s rights and obligations under the contract to the determent of the consumer”. This is quite a wide definition. It will therefore not come as a surprise to learn that specific examples of what would amount to unfair terms are included in Schedule 2 of CRA.
It should also be noted that there are some exclusions from these provisions; notably, any term in a contract that specifies the main subject matter or specifies the appropriate price payable for goods or services. Nonetheless, the range is very wide and gives the courts significant discretion in deciding whether or not to intervene in the enforcement of the consumer contract.
Are you involved in a contractual dispute? If so, the experienced Commercial Litigation team at Levi Solicitors LLP can assist you.