Essential points 107If a term is regarded as unfair, then it is not binding upon the consumer, although the
rest of the contact will stand if this is possible without the unfair term (reg. 8).
Schedule 2 to the Regulations sets out examples of the types of terms which may be
regarded as unfair. The list is far too long to be reproduced here, but includes:
(i) making the consumer subject to terms which he had no real opportunity to find out
about before the contract was made;
(ii) making a consumer in breach of contract pay too much by way of compensation; and
(iii) making the consumer bound by the agreement when the supplier is not.
The Regulations can consider the effect of any term in a contract except a ‘core’ term which
was written in plain and intelligible language. A ‘core’ term sets out the contract price
or the main subject matter of the contract. The Regulations are not therefore confined to
dealing with exclusion clauses. Potentially, they could have a very wide effect. In Office of
Fair TradingvAbbey National and others (2009)the Supreme Court held that terms which
allowed for bank charges to be made when customers overdrew their accounts without
permission were core terms, as they set out the price of having a bank account. They could
not therefore be assessed for fairness under the Regulations. The price of having an account
with the bank was not the same for all customers. Banking services to customers were a
package. Customers who overdrew paid a higher price than those who did not.
In addition to making unfair terms not binding upon consumers, the Regulations also
allow the Director General of Fair Trading to apply for an injunction to prevent an unfair
term from being used in contracts made with consumers.
Essential points
n The terms of a contract define the obligations which the parties to the contract have
undertaken.
n A breach of contract occurs whenever a term of the contract is breached.
n Express terms are agreed in words by the parties to the contract.
n Terms may be implied into a contract either by the court or by a statute.
n The Sale of Goods Act 1979 implies five major terms into contracts of sale of goods.
The implied terms are:
- that the seller has the right to sell the goods;
- that the goods correspond to any description by which they were sold;
- that goods sold in the course of a business are of satisfactory quality;
- that goods sold in the course of a business are fit for the buyer’s purpose;
- that, where goods are sold by sample, the bulk of the goods corresponds with the
sample in quality.
n A consumer who buys goods which do not conform to the contract is given a hierarchy of
rights, these rights being additional to any other rights which the consumer might have.
n Exclusion clauses are clauses which try to exclude or limit one party’s liability for
breach of contract or for liability arising in tort.
n The Unfair Contract Terms Act 1977 provides that no contract term can exclude
liability for death or personal injury arising from negligence.