Last checked : 14/09/2018

Contracts with consumers

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EU law sets out some fairness and transparency requirements for contracts you sign with consumers.

Which contract terms are concerned?

The information below only concerns selling to consumers who buy outside their professional sphere. It does not apply if you sell to other businesses.

EU requirements apply to any contract term which has not been individually negotiated with the consumer, such as usual standard contract terms drafted in advance. Both the main subject-matter of your contract and the value-for-money aspects are specifically excluded.

Take note that if you want to rely on the fact that the contract has been individually negotiated, you will need to prove this.

Contracts must be fair

The standard contract terms used in the course of your business, whether they are called 'terms and conditions' or are part of a detailed contract, have to be fair.

Under EU law, standard contract terms must not:

You must act in good faith, taking the consumers' legitimate interests into account, by dealing fairly and equitably with them.

Unfair contract terms are not binding

If specific terms in a contract are unfair, they are not binding on consumers and you may not rely on them, even if the consumer has signed the contract.

Provided the unfair term is not an essential element of the contract, the rest of the contract (but not the unfair term) will continue to bind you and the consumer.

Contracts must be transparent

Contract terms must be drafted in plain, understandable language. Contract terms must not only be grammatically clear but the consumer must be able to understand their economic consequences.

Be aware that any ambiguities will be interpreted in the consumer's favour.

Examples of potentially unfair terms

Besides the general requirements of 'good faith' and 'balance', the EU rules contain a list of specific contract terms that may be judged unfair.

Here are some situations where contract terms may be judged unfair under EU rules:
 

1. Liability when a consumer dies or is injured

Terms which exclude/limit your liability if a consumer dies or is injured because of an act/omission on your part.

2. Compensation if you don't deliver

Terms which inappropriately exclude/limit consumers' rights to compensation if you don't perform your side of the contract.

3. Get-out clause in your favour

Terms which allow you to get out of providing a service just because it doesn't suit you, but which still bind the consumer.

4. One-sided compensation for cancellation

Terms which allow you to keep pre-payments if the consumer cancels the contract without allowing for equivalent compensation to the consumer where you (the trader) cancel.

5. Excessive compensation

Terms which require a consumer who doesn't fulfil an obligation to pay an unreasonably high amount of compensation.

6. One-sided cancellation

Terms which allow you to dissolve a contract unilaterally but where the consumer does not enjoy the same right.

7. Cancellation at short notice

Terms which authorise you to terminate a contract with no fixed end-date at short notice, except where absolutely justified.

8. Automatic extensions of fixed duration contracts

Terms whereby a consumer has to notify an intention to end the contract but where the deadline for doing so is unreasonably early.

9. Hidden terms

Terms which bind consumers even though they could not have easily been aware of them before signing the contract.

10. One-sided changes to the contract

Terms which allow you to alter a contract unilaterally unless the contract states a valid reason for doing so.

11. One-sided changes to a product or service

Terms which allow you to make changes to the product or service to be provided unilaterally and without a valid reason.

12. Price variations

Terms where you can fix or increase the final price on delivery — without giving consumers the option of cancelling the contract — if the amount is much higher than initially agreed.

13. One-sided interpretation of the contract

Terms where only you have the right to interpret any clause of the contract and to decide whether the product or service complies with the contract.

14. Not honouring statements made by your staff

Terms under which you may try to avoid commitments made by your staff or where such commitments are subject to other conditions.

15. One-sided compliance with obligations

Terms obliging consumers to fulfil all of their obligations where you don't have to abide by yours.

16. Transfers of contracts to other traders under less favourable conditions

Terms which allow you to transfer the contract without the consumer's consent and which may give the consumer a worse deal.

17. Limited rights to legal action

Terms which restrict how and where consumers can take legal action and obliging them to provide proof which is the responsibility of the other party to the contract.

Details on national rules

Please remember that EU rules on unfair contract terms set a minimum standard which can be strengthened further or expanded through national laws.

For detailed information on applicable rules please seek advice from the Enterprise Europe Network in your country.

Consumer Law Ready

Consumer Law Ready is an EU-wide programme, offering free training courses in consumer law for micro businesses and SMEs. You can apply to attend a training course in your country to ensure that your SME is Consumer Law Ready.

You may prefer to learn at your own speed, sign up to access to the educational material. You can then complete an e-test and validate your learning with a certificate.

Check out the Consumer Law Ready portal to discover how you can sign up.

Related topics

EU legislation

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