UK: Unfair Terms in Consumer Contracts 1999 - New Regulations

Last Updated: 5 October 1999

On 1 July 1995 the Unfair Terms in Consumer Contracts Regulations came into force in the UK. These increase the protection available to consumers when they enter into standard form contracts to purchase goods and/or services. As of 1 October 1999 they will be replaced by new, slightly amended Regulations. The purpose of this note is to summarise the effect of the 1999 Regulations, and to highlight the changes that have been made.

Scope of the Regulations

The Regulations apply to any terms in a contract between a supplier of goods and/or services and a consumer which have not been individually negotiated by the parties. In other words they apply to standard form contracts. Standard terms in a contract may still fall within the Regulations even if other parts of the contract have been negotiated individually.

A "seller or supplier" is any individual or company which makes relevant contracts in the course of their business. The term includes both public and private bodies.

Unfair Terms

The effect of the Regulations is that any standard term which is "unfair" to the consumer will not bind the consumer - it will be deleted as far as the consumer is concerned. However, the use of an unfair term is not an offence and has no criminal implications.

A term is "unfair" if, contrary to the requirement of good faith, it introduces a significant imbalance between the rights and obligations of the consumer, compared to those of the supplier. This is judged in the light of all the relevant circumstances, including the type of goods or services involved, and the overall effect of the contract.

The Regulations set out a list of specimen terms which "may" be seen as "unfair". These are set out in the Appendix to this note.

Good Faith

As noted above, one factor to be considered under the Regulations when deciding if a term is unfair is whether it is "contrary to the requirement of good faith". The original Regulations had a schedule which explained how "good faith" was to be assessed. These guidelines have been deleted in the amended Regulations, and so it is now unclear how the courts will reach a decision on good faith. It may be viewed simply as a requirement for a supplier to avoid deceit or dishonesty in its dealings with consumers, or alternatively the courts may assume that any term which is unfair is also contrary to good faith; we must wait and see how the courts develop the law.

Does the Unfairness Test Apply to all Terms?

Providing they are in plain, intelligible language, those terms of the contract which relate to:

  • the main goods or services being provided; and
  • the price of those goods, or fees paid for those services will not be assessed for fairness. These are the "core provisions" of the contract.

The DTI has indicated that terms in insurance contracts which define and circumscribe the insured risk and the insurer's liability will also be regarded as core provisions and so will not be assessed for fairness.

The fairness of the core provisions does however remain a factor to be taken into account when assessing the fairness of other terms in the contract.

In practice, this relates to the consumer's expectations about the performance of the goods or services. For example, if a high powered or high specification model is displayed or demonstrated it would need to be made very clear that if it is not the model that is being sold. The description of the model would be a core term, but the rest of the contract might still be unfair if it did not make clear the difference between what was displayed or demonstrated, and what was sold.

In the case of doubt....

The Regulations also address the issue of unclear, hard to understand wording in contracts. Businesses (and lawyers!) should be careful to write contracts in "clear and intelligible" language as any doubt what a term means will be decided in favour of the consumer.


This is the key area in which the 1999 Regulations differ from the original Regulations. The Regulations used to be enforced solely by the Director General of Fair Trading (the Director). Whilst the Director retains his ability to take action in this area, numerous "qualifying bodies" have also been given enforcement powers. These include:

  • the Data Protection Registrar;
  • the Regulators of the electricity, gas, telecommunications, water and railway industries;
  • every weights and measures authority in Great Britain;
  • the Department of Economic Development in Northern Ireland; and
  • the Consumers' Association

Any of the above qualifying bodies may investigate the use of an unfair term, and may apply to court for an injunction to prevent suppliers or any other organisation using, or recommending the use of, an unfair term.

Another significant change is the scope of the power the courts have to make injunctions under the new Regulations. It is not limited to the use of a particular term by a particular person in a specific contract. The courts may in future prohibit the use of any similar term by any person.

Potentially, this is an extremely broad power. However, courts do not generally issue injunctions in cases where the injunction would need continual supervision, or where enforcement would be impractical. Businesses should take legal advice on this area as the situation develops, as we have yet to see how the courts will use this power. It may well be necessary to review specific terms in standard contracts in the light of new court decisions.

Other changes

There have been several significant deletions from the Regulations. The most important one is that the 1994 Regulations had a list of categories of contract which would never be affected by the Regulations. These included employment contracts, family law contracts and the incorporation and organisation of companies and partnerships. This section has been deleted and so one must now look at any contract to see whether it is covered by the Regulations - in other words whether it is a contract on standard terms between a business and a consumer for the supply of goods and/or services. This change does not mean that for example, employment contracts are now automatically covered by the Regulations. However it does mean that the issue is no longer as clear cut as previously.

When must the UK Regulations be considered?

The UK Regulations need to be considered:

  • whenever a contract is expressed to be subject to English law; or
  • whenever the law of a country which is not in the EU or the European Economic Area is selected as the applicable law and yet the contract has what the Regulation calls "a close connection" with the territory of the UK or another member of the EEA.

However, if the law of another EEA Member of State is chosen by the parties to govern the contract, that country will usually have legislation similar to the UK Regulations as they are derived from an EU directive which affected all member states.

Where there has been no choice of law by the parties, the governing law will have to be implied. This will normally be the law of the country in which the consumer is habitually resident, or the country with which the contract is most closely connected. The Directive makes it clear that the UK Regulations or equivalent legislation in the other Member States will apply to any contracts closely connected with the Member States in question. The UK Regulations are not so clear.

Key points

In general, all consumer contracts caught by the Regulations must :-

  • avoid terms which are considered to be unfair since those terms will not be binding on the consumer;
  • be clearly drafted, since if there is a doubt about the meaning of the term, the interpretation most favourable to the consumer will prevail; and
  • if in writing, use plain, intelligible language.


Examples of Terms which may be Unfair:

  • excluding or limiting a business liability in the event of personal injury to, or death of, a consumer, resulting from an act or omission of that business;
  • inappropriately excluding or limiting a consumer's rights in the event of total or partial non-performance, or inadequate performance, by a business, of its contractual obligations. This would include a provision preventing a consumer from offsetting a debt owed to a business against any claim which a consumer may have against it;
  • making an agreement binding on the consumer whereas provision of services by the business is subject to a condition whose realisation depends on the business alone;
  • allowing a business to retain money paid by the consumer in the event that the consumer decides not to complete the contract, without providing for the consumer to receive equivalent compensation from the business where the business is the party cancelling the contract;
  • allowing a business to retain money paid by the consumer for services not yet supplied to that consumer in circumstances in which the business has terminated the contract;
  • requiring a consumer who fails to complete the contract to pay a disproportionately high sum to the business in compensation;
  • allowing the business a discretion to terminate the contract without granting an equivalent right to the consumer;
  • enabling the business to terminate an open-ended contract without reasonable notice, except where there are serious grounds for doing so (subject to Notes 1, 2 and 3 below);
  • automatically extending a fixed-term contract where the consumer has not indicated a wish to terminate the agreement, when the time allowed for the consumer to decide not to continue with the contract is unreasonably short;
  • irrevocably binding a consumer to terms which that consumer had no real opportunity of becoming acquainted with before entering into the contract;
  • enabling a business unilaterally to alter the terms of the contract without a valid reason being specified in the contract (subject to Notes 2, 3 and 4 below);
  • enabling a business unilaterally to alter any characteristics of the product or services to be provided without a valid reason;
  • providing for the contract price to be determined at the time of delivery of the goods or allowing a business to increase the contract price, without giving the consumer the corresponding right to cancel the contract if the final price is too high in relation to the price agreed when the contract was entered into (subject to Notes 2, 3 and 5 below);
  • giving a business the right to decide whether the goods or services supplied are in conformity with the contract;
  • giving a business the exclusive right to interpret any term of the contract;
  • limiting a business obligation to respect commitments undertaken by its agents, or making its commitments subject to compliance with a particular formality;
  • obliging a consumer to fulfil all his obligations in circumstances where the business does not perform its obligations;
  • allowing a business the opportunity to transfer its rights and obligations under the contract, without the consumer's agreement, to a third party in circumstances which may serve to reduce the guarantees for the consumer; and
  • excluding or hindering a consumer's right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration or, unduly restricting the evidence available to the consumer or imposing on that consumer a burden of proof which, according to the applicable law, should lie with another party to the contract.


  1. This does not prevent a supplier of financial services from reserving the right unilaterally to terminate an open-ended contract without notice where there is a valid reason for doing so, provided that the supplier is required to inform the other contracting party or parties immediately.
  2. This provision does not apply to transactions in transferable securities, financial instruments and other products or services where the price is linked to fluctuations in a stock-exchange quotation or index or a financial market rate that the business does not control.
  3. This does not apply to contracts for the purchase or sale of foreign currency, travellers' cheques or international money orders denominated in foreign currency.
  4. This does not prevent a supplier of financial services from reserving the right to alter the rate of interest payable by the consumer, or due to the consumer, or the amount of other charges for financial services without notice where there is a valid reason, provided that the supplier is required to inform the other contracting party or parties at the earliest opportunity and that the latter are free to terminate the contract immediately.
  5. This does not prevent the use of price indexation clauses, where lawful, provided that that method by which prices vary is explicitly described.

This note is intended to provide general information about a recent development which may be of interest. It is not intended to be comprehensive nor to provide any specific legal advice and should not be acted or relied upon as doing so. Professional advice appropriate to the specific situation should always be obtained.

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