CMA Warning on Contract Terms and Conditions

The Competition and Markets Authority (CMA) has warned that businesses risk breaching consumer laws on unfair terms by leaving too long a time between contract reviews.  The CMA has just published its results following research into unfair contract terms, which looked at businesses’ behaviours regarding unfair contract terms with consumers.

Unfair contract terms are terms that give businesses an unfair advantage over consumers, for example, unfairly tying a customer into the contract; or excluding/limiting the customer’s legal rights or remedies even where the business fails to meet its own contractual obligations.

The CMA’s findings include that two-thirds of UK businesses sell directly to consumers, with most having some form of terms and conditions in place, which they communicate to the customer in a variety of ways.  However, the CMA identified a potential issue in the way businesses communicate their terms and conditions and, more specifically, how they communicate any changes to these terms and conditions.  Such changes have the potential to antagonize customers.

Worryingly, businesses’ perceived awareness of the rules around unfair contract terms is relatively low with more than half of businesses surveyed admitting they either did not know them well – or had never even heard of them.  Familiarity with the Consumer Rights Act 2015 (CRA) is even lower – with just 15% familiar with the new legislation.

The CMA found that two in five businesses reviewed their contract terms in the last year, although most do not review their contract terms regularly – with an average time between reviews of typically 4-5 years.   This means businesses risk their terms and conditions becoming outdated – with consequential disadvantages to the consumer.

The CMA highlights the digital sector in particular, as a sector more likely to experience disputes than those that do not sell digital content.  The digital sector is more likely to apply all their terms and conditions with no flexibility when seeking to resolve disputes.  The CMA says this indicates that they might not be set up to operate in a way that complies with legal protections afforded to consumers.

What does this mean?

Businesses supplying goods and services to consumers must familiarise themselves with the CRA, particularly its provisions in relation to unfair contract terms.  The new legislation was designed to better protect consumers, and businesses have a clear role to play in ensuring they are protecting their customers.  Remember that consumers now have enhanced rights and remedies in the event of a breach of the CRA by businesses. 

How can we help?

We provide business organisations with expert commercial advice on all their commercial issues, including unfair contract terms and the Consumer Rights Act.  If you have any concerns about the application of the CRA, or the drafting and legality of your terms and conditions, contact the experienced commercial solicitors at Herrington Carmichael for specialist advice. 

For further information or to discuss the issues raised by this article, please contact Mark Chapman or Matthew Lea on 01276 686222.