Unfair Contract Terms - Can Consumers Rely on Statutory Protection?

Preview Image
Date published: 16 Aug 2021
by DocPro Legal
Last Update: 31 Aug 2021

What is an unfair contract term?


Consumers are generally provided with unfair contracts in relation to goods and services. The contract terms tend to be one-sided and in fine prints. Most consumers do not care about these unfair contract terms until something blew up, in which case it is arguable whether these terms are enforceable.


A term or notice 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; An unfair term is not binding on the consumer unless he/she chooses to rely on it.


While unfairness of terms can be a problem in both contracts between businesses and between businesses and consumers, it is undeniable that most consumers tend not to read the terms carefully which may lead to contractual disputes.


In most common law jurisdictions, there are legislation to offer statutory protection for consumers against unfair contract terms (please see the table below). For the purposes of this article, consumer protection laws in the UK will be discussed in greater details.



Relevant legislation



Australian Consumer Law - Competition and Consumer Act 2010 (Cth) (CCA) (applicable to new contracts entered into on, or after 1 July 2010 and terms of existing contracts renewed or varied on or after 1 July 2010

Canada: British Columbia

Business Practices and Consumer Protection Act

Canada: Ontario

Consumer Protection Act

Hong Kong

The Sale of Goods Ordinance

The Supply of Services (Implied Terms) Ordinance


Consumer Protection (Fair Trading) Act

New Zealand

Fair Trading Act

United Kingdom

Consumer Rights Act 2015



The main piece of legislation governing the relationship between businesses and consumers in the United Kingdom is the Consumer Rights Act 2015 (CRA 2015) which protects consumers against traders. It covers all terms in the contract except the main subject matter which has been made prominent and transparent.


In this article, we will be exploring the issue of unfair contract terms and discussing whether consumers’ own negligence or the inadequacy of current legislation should be at fault for the consequent problems caused by unfair contracts.




Are unfair contracts the problem of consumers or the problem of corporates?


Generally, terms in standard form contracts between businesses and customers are incorporated either by signature or way of notice. L’Estrange sets out the basic principle that consumers are bound by the terms of a contract they enter into by signature. It was reluctantly held that a consumer’s ignorance of the contents of the contract is immaterial to this rule unless there is fraud or misrepresentation. In this case, Mrs L’Estrange failed to read an exclusion clause that excluded the liability for the impairment of the machine. While it was held by the courts that Mrs L’Estrange was not entitled to a damages claim, given the CRA 2015’s provisions on ensuring the satisfactory quality of the goods in question, such an issue caused by the consumer’s failure to read the contract would have been eased. However, in contracts entered by way of notice, it is evident in many precedents that the failure to read the contract was not the main problem leading to contractual disputes between businesses and consumers.



In fact, It has been found that the ambiguity in the incorporation of certain onerous clauses in a contract, instead of the consumer’s negligence regarding scrutiny of the terms, has more often been a cause of improper agreement. For instance, O’Brien is a case that centres around the issues of a) whether a provision that provides discretion for the business (the newspaper) to decide the final winner is onerous or not and b) if so, whether the business has taken reasonable steps to bring the consumer’s attention to it. It was eventually held that Mr O’Brien’s claim was invalid. Regardless, the ambiguity in the definition of an onerous clause has proven that the main cause leading to the contractual dispute may not be that of the consumer’s negligence to read the terms but is rather something more fundamentally related to the content of the contract.


Moreover, there are also ambiguities in the incorporation of exclusion clauses that may mislead even the consumers who have read the contracts, thereby obstructing the formation of a proper agreement between the parties.


In Thornton, the claimant did not read the exclusion clauses labelled on the pillars of the car park and was rejected by the defendant when seeking damages for his injury. Although the court eventually upheld his claim by ruling that the exclusion clause had not been incorporated into the contract, the case proves that even if consumers do scrutinise every term of a ‘contract’, the existence of non-incorporated, misleading terms will still prevent the parties from reaching a proper agreement.


In Hollier, although Mr Hollier did not read the exclusion clause on the forms he signed to Rambler Motors, the courts eventually upheld his claim against the latter as there were insufficient transactions to amount to a course of dealing that imports the written exclusion clause into later oral agreements. This again demonstrates that the consumers’ negligence is not the problematic component of the case but rather that the incorporation of clauses.


These ambiguities regarding whether an exclusion clause is properly incorporated into the contract often render the non-legally proficient consumer in a disadvantaged position even if they had read the ‘contract’ as they would still be unsure as to which terms are binding.


Furthermore, the scope of assessment for the unfairness of terms is still uncertain, which may leave much room for contractual disputes. This is a longstanding problem that has shown its impacts during the times when the Unfair Terms In Consumer Contracts (UTCCR) was in force. In Abbey National, it is pronounced that part of a package of different ways of charging for a package of varied services should be considered as part of the price matter that is regulated by legislation and is therefore ruled in favour of Abbey National despite the attempt of many consumers in challenging the fairness of the terms. This vague phrasing of the regulatory scope of unfair terms inherited by CRA 2015 may leave loopholes for businesses to offer unequal bargains to consumers who inherently, have much less bargaining power in most cases (e.g. national bank vs ordinary citizen of average income). It was also said that charges amounting to over 30% of the revenue stream should reasonably be considered as part of the ‘essential bargain’ which is arguably tautological as it is not impossible for businesses to abuse the legal loophole to create unfair contracts tremendously lucrative for themselves.


In light of the above, Baroness Hale of the Supreme Court of the United Kingdom asserted that the legislature could have construed the directive regarding the assessment of ‘core terms’ (including price matter) more broadly which further reflected the potential problems that could arise under the uncertain scope of assessment of unfair terms. In addition to the fact that despite a contract containing an unfair term will continue to have effect in every other practicable respect. The uncertainty in the applicable scope of the CRA 2015 has allowed the unfairness of terms to remain a significant problem in reaching a proper agreement under standard form contracts that awaits remedies from the legislative level.



We have identified that while consumers’ non-vigilance may impede the establishment of a proper agreement between themselves and businesses, more often than not the crux of the contractual disputes lies in the improper incorporation of terms, rendering the ignorance of consumers a legally irrelevant issue.


However, as consumers, it is still of paramount importance that we scrutinise our contracts carefully so that we can be clear of our own rights (and responsibilities), and minimise our risks of entering into unfair contracts.


Please note that this is a general summary of the position under common law and does not constitute legal advice. As the laws of each jurisdiction may be different, you may wish to consult your lawyer.


Contract, Contract Clauses, Contract Documents, Contract Terms, Unfair Contract Terms, How To Avoid An Unfair Contract, How To Avoid Entering Into An Unfair Contract, Consumer Protection, Consumer Protection Act, Cra 2015


DocPro Legal

DocPro Legal is a team of legal professionals with a passion for making quality documents and legal contract templates widely available to the public through cutting edge technology. Our lawyers are qualified in numerous common law jurisdictions including the United Kingdom, Australia, New Zealand, India, Singapore and Hong Kong. We have experience in major law firms and international banks with expertise in business, commercial, finance, banking, litigation, family, succession and company laws.

Share this Post