The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) protect consumers against unfair standard terms in contracts made with traders. They provide that a term that has not been individually negotiated is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations to the detriment of the consumer. The requirement of good faith in this context is one of fair and open dealing, and a term that is judged to be unfair is not binding on the consumer.
In Office of Fair Trading v Foxtons Ltd [2009] EWHC 1681 (Ch); [2009] PLSCS 214, the High Court was asked to consider terms that entitled letting agents to charge landlords: (i) renewal commissions if residential tenants introduced by Foxtons extended or renewed a tenancy (even though the freehold might have changed hands); or (ii) sales commission if a tenant bought the freehold.
The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) protect consumers against unfair standard terms in contracts made with traders. They provide that a term that has not been individually negotiated is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations to the detriment of the consumer. The requirement of good faith in this context is one of fair and open dealing, and a term that is judged to be unfair is not binding on the consumer. In Office of Fair Trading v Foxtons Ltd [2009] EWHC 1681 (Ch); [2009] PLSCS 214, the High Court was asked to consider terms that entitled letting agents to charge landlords: (i) renewal commissions if residential tenants introduced by Foxtons extended or renewed a tenancy (even though the freehold might have changed hands); or (ii) sales commission if a tenant bought the freehold. Core terms describing goods or services to be provided, and the price payable for them, are not affected by the UTCCR so long as they are written in plain and intelligible language. Foxtons tried to take advantage of this; it argued that the provisions imposing liability for renewal commission were unassailable because they described the services provided and their price. The High Court ruled that for renewal commission to be treated as a central part of the parties’ bargain the typical consumer would have to think that that was the case. As far as a typical consumer is concerned, the core bargain relates to finding a tenant, in exchange for a fixed one-off fee. A renewal that might take place in the future is a different event, which might or might not happen. Foxtons had not drawn the provisions imposing liability for renewal commission to its clients’ attention. Consequently, they were not core terms and were susceptible to challenge on the ground that they were unfair. However, the judge emphasised that this did not mean that renewal commission can never be central to the parties’ bargain. It might be possible to make renewal commissions central to a bargain by clear disclosure of, and negotiation on, such liability. The judge also considered whether the terms were expressed in plain intelligible language. He ruled that language is not lacking in plainness or intelligibility just because a skilled lawyer can find (or contrive) some equivocation in a word. Nonetheless, he decided that the terms were buried in the small print and that they were insufficiently clear to enable the typical consumer to understand them. The key question was whether the provisions were fair. The judge ruled that they imposed a significant financial liability on landlords in respect of transactions in which Foxtons played no material part. They caused a significant imbalance to the detriment of landlords, and were unfair. The judge did not decide that such commissions will always be unfair. None the less, his message was clear. Terms in consumer contracts must be expressed fully, clearly and legibly, and must contain no concealed ambushes or time bombs.
