Ecommerce Update: CMA issues new guidance on unfair terms in consumer contracts

11 April 2016


Following the commencement of the Consumer Rights Act 2015 (CRA), the Competition and Markets Authority (CMA) has recently issued a series of short-form guides, designed to help small businesses navigate the compliance requirements associated with the new legislation.

This new guidance is likely to be of particular use to any consumer-facing ecommerce businesses that may still be getting to grips with the requirements of the CRA.

By way of reminder:

  • the CRA came into force on 1 October 2015 and applies to contracts made between business and consumers.
  • A "consumer" is an individual "acting for purposes wholly or mainly outside of that individual's trade, business, craft or profession". 
  • A term will be unfair if it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer. Businesses should take particular care in relation to terms which significantly limit the business's liability, impose disproportionate sanctions for contractual breach or which provide for unilateral or one-sided variation or termination rights.
  • In considering whether a contractual term is fair, consideration will be given to the term itself, its context within the contract and the circumstances surrounding the contract at the time the relevant term was agreed.
  • Terms describing the main subject matter of the contract and those which set the price are not subject to the fairness requirements.
  • If a contractual term is unfair then it will not be legally binding on the consumer (although the customer may choose at its discretion to rely on the term). Enforcement bodies such as the CMA and Trading Standards may also take action to stop the term being used going forward.

Taking the form of short, illustrated fact sheets, the series of guides explain the importance of using fair and clear terms when dealing with consumers. There is a useful "myth-busting" section which debunks some of the commonly held misconceptions about contract terms and handy guidance which discusses the types of terms which may be unfair (along with tips to avoid this). Topics covered in the series include: "Cancelling a contract: when and how", "Responsibility if things go wrong" and "Subscriptions and automatic rollovers".

As well as updating existing law on the use of unfair terms, the CRA also introduced new rights and remedies for consumers where goods, services or digital content are not of satisfactory quality, not fit for purpose or not as described. Further guidance on the practical implications of the legislation can be found in our previous articles on this topic:

The consumer rights act

Regulatory round up - October 2015


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