For consumer contracts entered on or after 1 October, the Act updates existing laws providing that unfair contract terms are not binding on a consumer.
A term will be unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer. Whether a term is fair is determined:
- Taking into account the nature of the subject matter of the contract, and
- By reference to all the circumstances existing when the term was agreed and to all the other terms of the contract or of any other contract on which it depends.
As under the previous regime, the Act includes an indicative and non-exhaustive list of terms which may be regarded as unfair.
There are also certain terms that are deemed to be excluded from any assessment of fairness, namely:
- Terms which specify the main subject matter of the contract, and
- If the assessment is of the appropriateness of the price payable under the contract by comparison with the goods, digital content or services supplied.
However, these exclusions only apply if the term is both “transparent” and “prominent”.
- A “transparent” term is one which is “expressed in plain and intelligible language and (in the case of a written term) is legible”
- A term is “prominent” if it is “brought to the consumer’s attention in such a way that an average consumer would be aware of the term”
- The “average consumer” is a consumer who is “reasonably well-informed, observant and circumspect”.
The Act additionally requires traders to ensure that all their written terms in consumer contracts and notices are transparent, and provides that any ambiguous terms will be interpreted in the manner most favourable to the consumer.