Consumer Protection Law – Unfair Terms in Consumer Contracts

By December 1, 2016 No Comments

In 1993, the EU passed Council Directive 93/13/EEC on Unfair Terms in Consumer Contracts, in order to provide a measure of consistency to Consumer Protection law in Europe. Prior to the passing of this Directive, legislation on Unfair Terms varied across EU Member States, and for that reason, consumers were more hesitant to buy goods or services from other Member States. 


As such, the Directive aimed to standardise certain laws across Member States, thereby protecting consumers and facilitating the internal market.


The EU Directive was implemented in Ireland by the European Communities (Unfair Terms in Consumer Contracts) Regulations, 1995.  The Regulations apply to Business-to-Consumer transactions only; not commercial contracts or consumer-to-consumer contracts.


The Regulations do not apply to certain areas of law, such as succession, family law, employment law or company law, and they do not apply to contract terms that are mandatory e.g. those reflecting regulatory or statutory requirements.



 Establishing ‘unfairness’

Broadly speaking, a contractual term is unfair if it gives the seller or supplier an unfair advantage over the consumer, or limits the consumer’s legal rights.

An example of an unfair term could be one that is not drafted in plain English, or one that allows a trader to retain the consumer’s deposit if they cancel the contract, but doesn’t provide for compensation for the consumer if the trader pulls out.

There is a non- exhaustive list of the terms which may be regarded as unfair set out in Schedule 3 to the Regulations.


Was the term individually negotiated?

The Regulations only apply to terms which have not been individually negotiated. This  important provision ensures that where a consumer has not been able to have any  influence  on what a particular term says, for example in the case of standard contracts, the consumer will  be able to rely on these Regulations. 


Many consumers will enter into pre-formulated and standardised contracts as a matter of course, for example when shopping online. If the seller claims that the term in question was, in fact, individually negotiated, it will be up to him or her to prove this.


Core Terms

Under the legislation, terms regarding ‘the main subject matter of the contract’ and ‘the adequacy of the price’ are considered to be ‘core terms’ and are exempt from challenge. This means that terms defining the basic nature of the goods or services are exempt, as are those defining the price payable. This is because the legislation assumes that the consumer is able to make a decision on what price they are happy to pay, for which good or service, at the time of entering into the contract and can’t later claim that they feel they overpaid, or wanted something different.


If a term is unfair

If a term of a contract is found to be unfair, it will not be binding on the consumer. If, however, the contract itself is capable of continuing without that term, then the rest of the contract will continue to be binding on both the supplier/seller and the consumer. 


This legislation applies across the EU, and so provides particular protection for consumers entering everyday contracts like buying online, however the legislation can be relied upon to protect the consumer in many situations. In 2001, the High Court declared 15 conditions that were being used in building contracts to be unfair, and in 2013, the Court of Justice of the EU found that terms being used by mortgage providers were unfair to consumers, and found these terms not to be enforceable. 

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