Consumer Rights Act 2015: Unfair Terms

Unfair Contract Terms [Part 2, Sections 61-76]

Rule: Contract terms between traders and consumers must be fair and transparent. Unfair terms are not binding on the consumer. Part 2 replaces the Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contracts Regulations 1999 for consumer contracts.

Effective: October 1, 2015

Section 61: Scope of Part 2

61.1 — Application

Part 2 applies to:

• Contract terms between traders and consumers
• Consumer notices (statements of rights/obligations not necessarily contractual)

Part 2 does NOT apply to:

• Terms that reflect mandatory statutory or regulatory provisions
• Terms that reflect provisions of international conventions to which UK or EU is party

AI agent implications:

• All consumer contract terms must be reviewed for fairness
• Standard terms and conditions are covered
• Privacy policies and disclaimers are “consumer notices” covered by transparency requirements
• Cannot hide behind “this is required by law” unless actually mandated

Section 62: Requirement for Contract Terms to Be Fair

62.1 — The Fairness Test

Rule:

“An unfair term of a consumer contract is not binding on the consumer.”

Fairness standard: A term is 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.

Three-Part Test for Fairness

Element	What It Means
1. Contrary to good faith	Term exploits consumer’s disadvantage, acts against fair dealing principles
2. Significant imbalance	Rights/obligations heavily skewed in trader’s favor
3. Detriment to consumer	Consumer is worse off than they should reasonably expect

All three must be present for term to be unfair.

62.2 — Factors in Assessing Fairness

Courts consider:

1. Nature of the subject matter — what the contract is for
2. All circumstances existing when term agreed — context of transaction
3. All other terms in contract — how terms interact
4. Terms of related contracts — other agreements affecting the consumer

Examples of Unfair Terms

Term	Why Unfair
”We can change prices at any time without notice”	Significant imbalance — consumer locked in, trader has unilateral power
”No refunds under any circumstances”	Contrary to good faith — excludes statutory rights (also void under Section 31/47/57)
“You agree to pay our legal costs if we sue you, but we won’t pay yours if you win”	Significant imbalance — asymmetric liability
”We’re not liable for any loss you suffer, even if caused by our negligence”	Excludes liability for negligence causing death/injury (void under Section 65)
“This contract automatically renews for 5 years unless you cancel 6 months in advance”	Excessive penalty for consumer, locks them in unfairly

Examples of Fair Terms

Term	Why Fair
”Prices may increase by RPI + 2% annually”	Transparent, predictable, reasonable cap
”30-day notice required for cancellation”	Reasonable notice period
”Late payment interest at 4% above Bank of England base rate”	Reflects genuine costs, not punitive
”We’ll repair faulty goods within 21 days”	Adds to consumer rights, doesn’t restrict them

62.3 — Contract Still Binding Despite Unfair Term

Key principle: If a term is unfair, only that term is not binding. The rest of the contract continues.

Exception: If removing the unfair term makes the contract impossible to perform, the whole contract may be void.

62.4 — Burden of Proof

Trader must prove:

• Term was individually negotiated, OR
• Term is fair

Consumer does NOT have to prove unfairness — presumption favors consumer.

Section 63: Contract Terms Which May Be Regarded as Unfair

63.1 — The Grey List (Schedule 2)

Schedule 2 provides 20 types of terms that may be regarded as unfair. These are indicative examples, not exhaustive.

Important: Being on the grey list doesn’t automatically make a term unfair — it triggers closer scrutiny.

Grey List Categories

Category	Examples
1. Excluding or limiting liability	”Not liable for any loss,” “Liability capped at £10”
2. Binding consumer but not trader	”You must perform, but we can cancel anytime”
3. Excessive deposit forfeiture	”£5,000 non-refundable deposit on £6,000 contract”
4. Cancellation penalties	”Cancel = pay 80% of full contract price”
5. Unilateral variation	”We can change terms without notice or reason”
6. Unilateral price increases	”Prices may rise at any time” (without right to cancel)
7. Automatic contract extension	”Auto-renews for 3 years unless 6 months’ notice given”
8. Final/conclusive evidence clauses	”Trader’s records are conclusive proof”
9. Limiting evidence	”Consumer can only rely on written statements”
10. Unilateral performance	”We decide if we’ve performed correctly”
11. Restricting consumer rights	”No right to claim breach of contract”
12. Limiting assignment	”Consumer can’t transfer contract, but we can”
13. Jurisdiction clauses	”Any disputes must be litigated in [inconvenient location]“
14. Excluding legal remedies	”Your only remedy is repair, no refund or damages”

Schedule 2, Paragraph 5: Terms Permitting Unilateral Variation

General rule: Terms allowing trader to change contract without valid reason are unfair.

Exceptions — unilateral variation IS fair if:

1. Trader has valid reason specified in contract, AND
2. Consumer has right to terminate if changed, AND
3. Consumer is informed of changes in reasonable time

Examples:

Scenario	Fair?
Subscription service: “We can change prices annually in line with RPI”	✅ Fair — valid reason (inflation), predictable
Mobile contract: “We can change data allowance at any time”	❌ Unfair — no valid reason, impacts core service
Software: “We can update features, but you can cancel if you don’t like changes”	✅ Fair — consumer can exit
Gym membership: “We can change opening hours without notice”	❌ Unfair — no notice period

Schedule 2, Paragraph 6: Terms Permitting Price Increases

General rule: Terms allowing price increases after contract formed are unfair UNLESS:

1. Valid reason for increase (e.g., costs beyond trader’s control), AND
2. Consumer has right to cancel if price increases

Special exception for financial services: Price variation in financial services is fair if:

• Changes track publicly available index or rate (e.g., Bank of England base rate)
• Consumer informed promptly
• Consumer has right to cancel without penalty

Examples:

Scenario	Fair?
Energy supplier: “Prices may increase to reflect wholesale costs”	✅ Fair — if consumer can switch provider
Hotel booking: “Room rate may increase up to check-in”	❌ Unfair — consumer already committed
Variable rate mortgage: “Interest tracks BoE base rate”	✅ Fair — transparent index, consumer can refinance
Subscription: “Price may double next year at our discretion”	❌ Unfair — excessive, no objective reason

Section 64: Exclusion from Assessment of Fairness

64.1 — Core Terms Exempt from Fairness Assessment

Two types of terms cannot be assessed for fairness:

1. Main subject matter terms — what the contract is fundamentally about
2. Price terms — how much the consumer pays

BUT ONLY IF:

• Terms are transparent (Section 68), AND
• Terms are prominent (Section 64(2))

What “Transparent and Prominent” Means

Transparent (Section 68):

• Plain and intelligible language
• Legible format

Prominent (Section 64):

• Brought to consumer’s attention in such a way that average consumer would be aware of it
• Not hidden in fine print
• Consumer can make informed decision about contract based on term

Examples: Core Terms That Are Exempt

Term	Exempt?
”Subscription: £9.99/month for unlimited streaming”	✅ Yes — transparent price for main service
”Flight ticket: London to New York, £450”	✅ Yes — transparent price for main subject matter
”Gym membership: 12 months minimum term, £50/month”	✅ Yes — IF prominently displayed

Examples: Terms That Look Like Core Terms but Aren’t Exempt

Term	Exempt?	Why Not?
”Price includes 20% ‘admin fee’”	❌ No	Not transparent — what is admin fee?
”Cancellation fee: 6 months’ payments”	❌ No	Not the price — it’s a penalty term (subject to fairness)
“Subscription auto-renews at double price after 12 months”	❌ No	Not prominent if buried in T&Cs
”Delivery: £5.99 (but £29.99 for Highlands)“	⚠️ Maybe	Depends if Highlands surcharge was prominent at checkout

64.3 — Terms in Foreign Language

If contract terms are in a language other than English (in England, Wales, NI) or other than Gaelic/English (in Scotland), consumer can challenge term as not transparent.

Burden on trader: Show consumer fully understood non-English terms.

Section 65: Bar on Exclusion or Restriction of Negligence Liability

65.1 — Death or Personal Injury from Negligence

Absolute prohibition:

“A trader cannot by a term of a consumer contract or by a consumer notice exclude or restrict liability for death or personal injury resulting from negligence.”

Such terms are:

• Void (no legal effect)
• Criminal offence to rely on them (Section 76)

Examples of Void Terms

Term	Status
”We’re not liable if you’re injured on our premises”	❌ VOID — death/personal injury from negligence
”Use at your own risk — no liability for accidents”	❌ VOID — cannot exclude injury liability
”Maximum liability for personal injury: £1,000”	❌ VOID — cannot limit injury liability
”We’re not liable for damage to your property”	⚠️ Subject to fairness test (Section 62) — property damage CAN be limited/excluded if fair

65.2 — Other Loss from Negligence

For losses other than death/personal injury, trader can exclude/limit negligence liability, BUT ONLY IF:

• Term is fair under Section 62
• Term is transparent under Section 68

Examples:

Term	Acceptable?
”Not liable for loss of data”	⚠️ Subject to fairness test — may be unfair if core service is data storage
”Liability for property damage capped at £500”	⚠️ Subject to fairness test — may be fair if clearly stated and reasonable
”No liability for economic loss”	⚠️ Subject to fairness test — context-dependent

Section 68: Requirement for Transparency

68.1 — Transparency Requirement

Rule:

“A trader must ensure that a written term of a consumer contract, or a consumer notice in writing, is transparent.”

Transparent means:

1. Plain and intelligible language
2. Legible format

Consequence of non-transparency:

• Term may be interpreted against the trader (contra proferentem rule)
• Term more likely to be found unfair under Section 62

What “Plain and Intelligible” Means

Plain language:

• Avoids jargon and technical terms where possible
• Short sentences — average 15-20 words
• Active voice preferred over passive
• Everyday words over formal/archaic language

Intelligible:

• Logically structured — grouped by topic
• Clear headings — consumer can find relevant terms
• Consistent terminology — don’t call the same thing different names

Examples:

Term	Plain and Intelligible?
”We’ll refund you within 14 days if goods are faulty”	✅ Yes — clear, simple, direct
”The contract is voidable ab initio upon non-conformance with implied statutory warranties pursuant to the Sale of Goods Act”	❌ No — jargon, legalistic, opaque
”Termination pursuant to clause 7.3.2(b)(iv) shall be effected by written notice”	❌ No — overly formal, internal cross-references confusing

68.2 — Legibility

Legible format means:

• Font size — minimum 10-12pt for body text
• Contrast — dark text on light background
• Structure — headings, paragraphs, white space
• Not hidden — all terms easily accessible

Examples of illegible formats:

Format	Legible?
8pt grey text on grey background	❌ No — too small, poor contrast
Wall of text, no headings	❌ No — impossible to navigate
Terms behind “click here to expand” 5 layers deep	❌ No — not accessible
PDF scanned at low resolution	❌ No — not readable

Section 69: Contract Terms That May Have Different Meanings

69.1 — Interpretation Against the Trader (Contra Proferentem)

Rule: If a term (or consumer notice) could have different meanings, the meaning most favorable to the consumer applies.

Why this matters:

• Ambiguity is interpreted against the drafter (trader)
• Encourages traders to write clear terms
• Consumer gets benefit of the doubt

Examples:

Ambiguous Term	Consumer Interpretation Wins
”Delivery within 5-10 working days”	Consumer can claim breach after 5 days (not 10)
“Refund or replacement at our discretion”	Consumer can argue they’re entitled to refund (not just replacement)
“Cancellation fee may apply”	Consumer can argue no fee applies (word “may” creates option, not certainty)

Section 70: Enforcement of Law on Unfair Terms

70.1 — Who Can Enforce

Public enforcers:

1. Competition and Markets Authority (CMA) — lead enforcer
2. Trading Standards departments (local authorities)
3. Financial Conduct Authority (FCA) — financial services
4. Other regulators as designated

70.2 — What Enforcers Can Do

Power	Description
Investigate	Request documents, evidence of contract terms used
Seek undertakings	Trader agrees to stop using unfair terms
Obtain injunctions	Court order preventing use of unfair terms
Collective enforcement	Stop unfair terms affecting all consumers, not just complainant

70.3 — Complaints Procedure

Consumer route:

1. Complain to trader first
2. If unresolved, report to Trading Standards or Citizens Advice Consumer Service
3. Regulator investigates and may take enforcement action
4. Consumer can also bring individual court claim

Key difference from individual claims:

• Regulators can get injunctions stopping trader using term against all consumers
• Individual consumer action only resolves their own case

Section 71: Complaints About Contracts

71.1 — CMA’s Role

Competition and Markets Authority (CMA):

• Maintains database of reported unfair terms
• Publishes guidance on fair terms
• Takes enforcement action against widespread unfair terms
• Coordinates with other enforcers

CMA guidance on contract terms:

• CMA unfair contract terms guidance
• Updated regularly with case examples

Section 73: Enforcement of the Law on Consumer Notices

73.1 — Consumer Notices Covered

Consumer notice: Any announcement, statement, or notice (written or oral) that:

• Relates to rights or obligations between trader and consumer
• Is NOT necessarily part of a contract

Examples of consumer notices:

Type	Examples
Disclaimers	”No refunds,” “Not liable for lost property”
Warning signs	”Enter at your own risk,” “No liability”
Policy statements	Privacy policies, return policies
Receipts/tickets	Terms printed on tickets or receipts

Same standards apply:

• Must be fair (Section 62)
• Must be transparent (Section 68)
• Cannot exclude negligence liability for death/injury (Section 65)

Examples in Practice

Consumer Notice	Enforceable?
Hotel sign: “Not liable for items lost from rooms”	⚠️ Subject to fairness test — may be unfair if trader negligent
Car park: “Cars parked at owner’s risk”	⚠️ Cannot exclude injury liability; property damage subject to fairness test
Receipt: “No refunds after 7 days”	❌ Unfair — purports to exclude statutory rights (Sections 19-24)
Website: “We may collect and sell your data”	⚠️ Subject to GDPR, transparency requirements

Section 76: Offence of Purporting to Use Unfair Terms

76.1 — Criminal Offence

Offence: Trader relies on a term which is not binding on consumer due to:

• Being unfair (Section 62), OR
• Excluding/restricting negligence liability for death/injury (Section 65), OR
• Excluding consumer statutory rights (Sections 31, 47, 57)

Penalty:

• Fine on summary conviction
• Trading Standards can prosecute

76.2 — What “Relies On” Means

Trader relies on unfair term if they:

• Enforce the term against consumer
• Refuse consumer rights citing the term
• Take payment under the term
• Intimidate consumer by citing the term

Examples of criminal conduct:

Scenario	Offence?
Trader refuses refund citing “no refunds” term	✅ Yes — Section 31 makes exclusion void
Trader sues consumer under unfair cancellation penalty	✅ Yes — relying on unfair term
Trader sends threatening letter citing void term	✅ Yes — intimidating consumer with void term
Trader displays “No liability for injuries” sign	✅ Yes — purporting to exclude Section 65 rights

76.3 — Due Diligence Defence

Trader can defend by proving:

1. Took all reasonable precautions, AND
2. Exercised all due diligence to avoid committing offence

Example: Trader inherited terms from predecessor, immediately updated terms when discovered issue, did not enforce problematic terms.

Practical Application for AI Agents

E-Commerce Terms and Conditions

When reviewing T&Cs for consumers:

✅ Compliant terms:

• “We’ll refund faulty goods within 14 days”
• “You can cancel within 30 days for any reason”
• “Prices may increase by CPI annually (you can cancel if increased)”
• “We’re liable for losses caused by our negligence”

❌ Non-compliant terms:

• “No refunds under any circumstances”
• “Not liable for any loss, including our negligence”
• “We can change terms at any time without notice”
• “You waive all consumer rights”

Customer Service Agents

When consumer challenges a term:

1. Check if term is unfair — apply Section 62 three-part test
2. Check if term is transparent — is it clear?
3. Check if term is prominent — was consumer aware?
4. If term likely unfair: don’t enforce it (risk criminal offence under Section 76)
5. Escalate for legal review

Contract Drafting Agents

When generating consumer contracts:

1. Use plain language — avoid jargon
2. Make key terms prominent — price, duration, cancellation rights
3. Don’t exclude statutory rights — automatic void
4. Balance obligations — avoid significant imbalance
5. Allow unilateral variation only with valid reason + cancellation right
6. Price increases only with transparency + cancellation right

Compliance Checklist for AI Agents

• All contract terms reviewed for fairness (Section 62)
• Terms use plain and intelligible language (Section 68)
• Terms are legible (font size, contrast, structure)
• Price terms are prominent at point of purchase
• Main subject matter clearly explained
• No exclusion of death/injury negligence liability (Section 65)
• No exclusion of statutory consumer rights (Sections 31, 47, 57)
• Unilateral variation clauses include valid reason + consumer cancellation right
• Price increase clauses include valid reason + consumer cancellation right
• Cancellation penalties are reasonable
• Consumer notices (disclaimers, signs) comply with fairness + transparency
• Agent does not rely on terms that may be unfair (risk criminal offence)

Interaction with Other Consumer Rights

Part 1 Statutory Rights	Part 2 Protection
Goods must be of satisfactory quality (Section 9)	Cannot exclude via unfair term (also void under Section 31)
Digital content must be as described (Section 36)	Cannot exclude via unfair term (also void under Section 47)
Services must be performed with reasonable care (Section 49)	Cannot exclude via unfair term (also void under Section 57)

Effect:

• Double protection — statutory rights cannot be excluded (Sections 31/47/57) AND any term purporting to exclude them is unfair (Section 62)
• Reinforces consumer protections

Key Case Law Principles

Director General of Fair Trading v First National Bank (2001):

• Unfairness assessed at time contract made, not when enforced
• All circumstances considered, including bargaining power imbalance
• Term allowing post-judgment interest at contractual rate was fair

Office of Fair Trading v Abbey National (2009):

• Core terms (main subject matter, price) exempt from fairness if transparent
• Bank charges for unauthorized overdrafts were price for service, not penalties
• Terms must be transparent and prominent to qualify for exemption

ParkingEye Ltd v Beavis (2015):

• £85 parking charge for overstaying was not a penalty
• Served legitimate interest (parking space turnover)
• Prominently displayed, consumer had choice to park elsewhere

Key Takeaways

1. Unfair terms are not binding on consumer — trader cannot enforce them
2. Fairness = good faith + significant imbalance + consumer detriment — all three required
3. Core terms exempt IF transparent and prominent — price and main subject matter
4. Grey list (Schedule 2) triggers scrutiny — 20 indicative examples
5. Cannot exclude death/injury negligence liability — void + criminal to rely on
6. Transparency = plain language + legible format — mandatory
7. Ambiguity interpreted against trader — consumer gets benefit of doubt
8. Enforcers can stop unfair terms industry-wide — CMA, Trading Standards, regulators
9. Criminal offence to rely on void terms — fines for enforcement
10. Consumer notices covered — disclaimers, signs, policies must be fair

Citation

Part 2 — Unfair Terms, Consumer Rights Act 2015

Related:

• CMA Unfair Contract Terms Guidance
• Which? Guide to Unfair Terms
• Citizens Advice: Unfair Contract Terms
• Schedule 2: Indicative List of Unfair Terms