Unfair contract terms
Every time you buy a product or service from a professional trader, you're entering into a contract - whether it's signing up for gym membership, ordering car tyres online, getting a mortgage for your house or even just buying your weekly shopping from the supermarket.
Under EU law, standard contract terms used by traders have to be fair. This doesn't change if they're called "terms and conditions" or are part of a detailed contract that you actually have to sign. The contract is not allowed to create an imbalance between your rights and obligations as a consumer and the rights and obligations of sellers and suppliers.
Contract terms must be drafted in plain, understandable language. Any ambiguities will be interpreted in your favour.
Potentially unfair terms
In addition to the general requirement of "good faith" and "balance", EU rules contain a list of specific terms that may be judged unfair. If specific terms in a contract are unfair, they are not binding on you and the trader may not rely on them.
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 a trader's liability if a consumer dies or is injured because of an act/omission by that trader.
Sam joined his local gym. When he had a closer look at his membership contract, he was surprised to read that the gym doesn't accept responsibility for any harm or injury caused by the use of the facilities and equipment.
When he checked, he was told by his national consumer association that a term excluding the trader's liability is not valid. Following an investigation by the national enforcement authority, on the basis of Sam's complaint, a court banned the trader from using such a term in its contracts.
2. Compensation if a trader doesn't deliver
Terms which inappropriately exclude/limit consumers' rights to compensation if the trader doesn't keep to his side of the contract.
Costas went on a package holiday with his girlfriend to Kenya for which he paid EUR 2 000 per person. The holiday was a disaster: the flight was delayed by 12 hours, the air conditioning in the hotel didn't work, and the safari trip took place, but not in the park they had been promised.
They complained to the tour operator and asked for compensation amounting to a total of EUR 5 000 (EUR 4 000 for the cost of the package and EUR 1 000 for lost time and enjoyment). The tour operator only agreed to compensate them EUR 1 000, pointing to a provision in the contract limiting the organiser's liability to 25% of the total cost of the holiday.
When Costas asked his local consumer association, they told him that terms which inappropriately limit the trader's liability in case of inadequate contractual performance are most probably unfair. Costas decided to take the tour operator to court to enforce his rights.
See also your rights if you are buying a package holiday.
3. Get-out clause in favour of the trader
Terms which bind the consumer but allow traders to get out of providing a service just because it doesn't suit them.
Liese was travelling a lot and decided to hire a gardener to come every week to look after her lawn and flowerbeds. But one month in summer the gardener didn't come and the flowers died from lack of water. When Liese complained, the gardener showed her a term in the contract allowing him not to come if he had too much work on for other clients.
Liese told the gardener that, according to information she had found on the internet, this clause wasn't valid. She therefore managed to get compensation for the lost flowers and got a formal commitment from the gardener guaranteeing his weekly services.
4. One-sided compensation for cancellation
Terms which allow a trader to keep pre-payments if the consumer cancels the contract without allowing for equivalent compensation to the consumer where the trader cancels.
Mary ordered a kitchen for her new apartment. She paid a 30% deposit up-front and the company came to her apartment to take measurements. The furniture was supposed to be ready and installed in 8 weeks.
After 2 months Mary called the seller and was told that, unfortunately, it would not be possible to deliver the kitchen for several months. As Mary wanted to move into her new apartment, she cancelled the contract, and bought a kitchen which was in stock in another shop. She then asked for a refund of her deposit. The seller refused to return the deposit, pointing to a contract term stating that if the customer cancels the contract the seller is entitled to keep the deposit. When Mary had a closer look at the contract she discovered that, had the seller decided to cancel the contract, she would not have been entitled to an equivalent compensation.
Mary checked with her national consumer association, who told her that the contract clause was unfair. Therefore, Mary contacted the seller again, referred to her contacts with legal experts in the consumer association, and managed to get her deposit refunded.
5. Excessive compensation
Terms which require a consumer who doesn't fulfil an obligation to pay an unreasonably high amount of compensation.
Tom rented a car at Malaga airport. He was supposed to return it with a full tank of petrol 3 days later. On the day, there was a traffic jam on the road to the airport because of an accident. Tom didn't want to waste additional time filling the car up with petrol if it meant missing his flight. He returned the car with the tank half empty. Once back home, he saw that he had been charged EUR 45 for the fuel, plus a EUR 150 fee for returning the car with an empty tank.
Tom contacted the European Consumer Centres network and was told that imposing such disproportionately high fees is unfair. With ECC-net's support, the rental company returned EUR 100.
6. One-sided cancellation
Terms which allow a trader to dissolve a contract unilaterally but where the consumer does not enjoy the same right.
Cristina ordered her wedding dress from a fashion designer. 2 weeks before the wedding, she was supposed to meet the designer for a final fitting. When she called him to make an appointment, he told her he'd ended their contract without providing any real justification.
Cristina checked with a lawyer friend whether the designer could just cancel the contract like that. Her friend explained it was clearly an unfair term because the contract doesn't give Cristina the same right to cancel. Her friend called the designer and explained the legal situation. The designer contacted Cristina and made an appointment for the fitting. Her dress was ready just in time for the wedding.
7. Cancellation at short notice
Terms which authorise a trader to terminate a contract with no fixed end-date at short notice, except where absolutely justified.
Nathalie had a contract with a small local internet provider, with no end date specified. One day she received an e-mail informing her that the contract would be terminated as of the following week. She called the provider and asked for an explanation but they couldn't give any real reason for cancelling the contract at such a short notice.
Nathalie contacted a consumer association, who told her such term was most likely unfair. She therefore contacted the internet provider again and managed to get her subscription extended long enough for her to switch to a different provider.
8. Automatic extensions of fixed duration contracts
Terms whereby a consumer has to notify an intention to end such contracts but where the deadline for doing so is unreasonably early.
Mark has a 1 year mobile phone contract which he took out 10 months ago. His wife recently switched to a new mobile phone company offering very attractive bundle packs and free calls within the network. Mark decided to switch to this new operator as soon as his contract expired. He checked his contract and found out that, if he wanted to end it, he should have given 6 months' notice. As he hadn't done that, his contract had been automatically extended for another year.
Mark was disappointed and decided to contact his national consumer organisation. They informed him it was unfair on the part of the mobile phone company to require so much notice. They advised him to take the matter to court if the company tried to enforce the unfair term.
9. Hidden terms
Terms which bind consumers even though they could not easily have been aware of them before signing the contract.
Monika rented an apartment, on a 3 year lease. When she moved in she found out she had to use a specific cleaning service that charged EUR 100 every month, on top of the rent. Sure enough there was a clause in the contract referring to a document about cleaning services. But Monika had never been given this document.
Monika searched on the internet and found that hidden terms like this are unfair. She told the owner of the apartment that this additional obligation wasn't fair because she hadn't been informed of it before signing the lease - and she eventually managed to avoid the fixed cost.
10. One-sided changes to the contract
Terms which allow the trader to alter a contract unilaterally, unless the contract states a valid reason for doing so.
Pavel took out a loan from his bank to buy a new car. After 8 months, he discovered that his monthly instalments had gone up.
When he looked more closely at the contract, Pavel discovered a term authorising the bank to change the interest rate without giving him a chance to end the contract.
He contacted his local consumer association for advice. They told him that, as there was no clause giving Pavel the right to terminate the contract, the term allowing the bank to put up the interest rate was unfair. They advised him not to pay the higher interest rate and to file an official complaint with them if the bank refused to review the unfair term. Pavel followed their advice and managed to have the contract clause changed.
11. One-sided changes to the product or service
Terms which allow a trader to make changes to the product or service to be provided unilaterally and without a valid reason.
Birgit ordered new tiles for her renovated bathroom. She chose white and blue striped tiles. After 4 weeks, the tiles arrived but they were simple white tiles with no stripes. When she contacted the supplier they pointed out that, under the terms and conditions displayed on the order form, if the company was unable to supply an item for whatever reason, it would replace it with an item of equivalent standard and value.
Birgit contacted the European Consumer Centres network and was told it was unfair to have terms and conditions that provided for unilateral changes in the product supplied. With the support of ECC-net, she eventually got her money back.
12. Price variations
Terms where the trader can fix the final price on delivery or increase it, without giving consumers the option of cancelling the contract if the amount is much higher than initially agreed.
Thomas signed a 5 year contract for servicing of the central heating system in his new house. After 18 months, he found that the monthly fee had unexpectedly gone up. When he asked for an explanation, the trader pointed to a clause in the contract reserving the company's right to increase its prices for servicing the heating, with written notice of just one month.
Thomas checked with his national consumer association, who told him that a term allowing the trader to increase the price of a service without allowing the consumer to cancel the contract was most likely unfair. Thomas decided to cancel the contract instead of paying unforeseen additional costs.
13. One-sided interpretation of the contract
Terms where the trader alone has the right to interpret any clause of the contract and to decide whether the product or service complies with the contract.
Krisztina ordered a personalised photo book with pictures of her daughter. When the book arrived she discovered that the cover of the book was not the colour she'd chosen. She complained to the seller but he refused to reprint the book. He referred to the terms and conditions displayed on the order, saying that the delivery is in conformity with the contract when the seller decides it is.
Krisztina knew that such terms are unfair and insisted that the trader reprint the book or give her money back. By pointing to her rights, she eventually got the book reprinted at no additional cost.
14. Not honouring statements made by the trader's staff
Terms under which a trader tries to dodge commitments made by his staff or where such commitments are subject to other conditions.
Jake bought some shoes in a shop. He did not have time to try them on but the shop assistant told him that, if the size was wrong he could take them back and exchange them. The shoes turned out to be too small, so Jake took them back. But the manager refused the exchange and showed him a written document on the conditions of sale. The document stated that exchanges weren't offered, and that only the rules contained in that document were valid.
Jake contacted the European Consumer Centres network who confirmed the unfairness of the term. With ECC-net's assistance, he soon managed to exchange the shoes for another pair.
15. One-sided compliance with obligations
Terms obliging consumers to fulfil all their obligations when the trader doesn't abide by his.
Louise subscribed to a business press review newsletter. She was supposed to receive a press review from all EU countries in English every day. But sometimes there was no newsletter for 2 or 3 days, and not all the news items were translated into English. One month she received just one newsletter. Although the service wasn't working properly, she still received invoices for the full subscription fee. She asked the supplier to reduce the price so she only had to pay for the days when she actually received the service. However, the company refused and pointed out that, according to the contract, the service could be temporarily interrupted without releasing the client from their payment obligations.
In the end, the national consumer organisation stepped in. Louise's fee was reduced and the service provider was forced to change the unfair term in the contract.
16. Transfers of contracts to other traders under less favourable conditions
Terms which allow the trader to transfer the contract without the consumer's consent and which may give the consumer a worse deal.
Karl ordered a new kitchen from a company that promised a "10-year guarantee". The kitchen was to be installed in his apartment in 6 weeks' time. When the day finally came, Karl noticed the kitchen fitters were from a different company. They confirmed that his contract had been transferred to their company. Karl called the new company to check if the 10-year guarantee was still valid. The new company explained that their policy was the usual two-year guarantee and that Karl's contract had given the old company the right to transfer their rights and obligations to the new company.
Karl sought advice from a national consumer association. He was told that a clause authorising contractual rights and obligations to be transferred was unfair and, therefore, invalid - when it meant a reduced guarantee. Therefore, Karl was still entitled to the 10-year guarantee against the company from which he ordered the kitchen originally. Based on the consumer's association advice, he managed to get a warranty extension from the former company, which committed to provide him with necessary after-sales services.
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.
Alain bought a flight ticket from Paris to Porto for his summer holiday. On his way to the airport, he got stuck in public transport, arrived at the airport 30 minutes late and ended up having to buy a new ticket to get to Porto. When checking-in 2 weeks later at Porto airport, he was shocked to discover that his return flight had been cancelled on the grounds that he had not used the outward ticket. He had no choice but to buy another ticket with the same airline.
When boarding the plane, he told the flight attendant that he would start court proceedings to get compensation as soon as he got back to France. The flight attendant told him that, under the airline's standard terms and conditions, he was only allowed to take action in the UK where the airline was based. Alain had a closer look at the terms and conditions on the company's website and found a term stating that any legal action should be brought before a UK court.
Alain contacted the European Consumer Centres network, who told him that a term that limited his legal right to take action was unfair and invalid, so he could take the matter to court in France after all. He also received confirmation that a term providing for the cancellation of a return ticket purely on the grounds that the outward ticket had not been used may, in certain circumstances, be considered as unfair.
If you find unfair terms in your contract
Contract terms that are unfair under EU law have no legal or binding force on consumers. As long as the unfair term is not an essential element of the contract, the rest of your contract (but not the unfair term) remains valid. This means, for example, that you won't have to give up your gym membership just because one clause in the contract is unfair.
EU countries must make sure that consumers know how to exercise these rights under national law, and must have procedures under which business may be prevented from using unfair terms.
Throughout the EU, national authorities are in responsible for enforcing EU consumer protection rules. If you feel that a particular trader is repeatedly breaching these rules, including at a cross-border level, you should report your case to them.