The Regulations apply, with certain exceptions, to terms in contracts concluded between a seller or supplier and a consumer which have not been individually negotiated.
Terms cannot be reviewed for fairness within the meaning of the Regulations if they are terms which reflect:
Terms written in plain, intelligible language cannot be reviewed for fairness within the meaning of the Regulations if the terms relate to:
- the definition of the main subject matter of the contract; or
- the adequacy of the price or remuneration, as against the goods or services supplied in exchange.
However, we can review terms concerning these matters for fairness within the meaning of the
Regulations if they are not written in plain, intelligible language. We do not consider that it is enough that a lawyer could understand the term for it to be excluded from such a review. The term must be plain and intelligible to the consumer.
Terms are regarded as unfair if, contrary to the requirement of good faith, they cause a significant imbalance in the parties' rights and obligations to the detriment of the consumer.
Under regulation 13 we have the power to request, for certain purposes:
'(a) a copy of any document which that person has used or recommended for use, [...] as a pre-formulated standard contract in dealings with consumers;
(b) information about the use, or recommendation for use, by that person of that document or any other such document in dealings with consumers.'
Unless the case is urgent, we will generally first write to a firm to express our concern about the potential unfairness of a term or terms (within the meaning of the Regulations) and will invite the firm to comment on those concerns. If we still believe that the term is unfair, we will normally ask the firm to stop including the term in new contracts and to stop relying on it in any concluded contracts. If the firm either declines to give an undertaking, or gives an undertaking but fails to follow it, the FSA will consider the need to apply to the courts for an injunction under regulation 12.
In deciding whether to ask a firm to undertake to stop including a term in new contracts and to stop relying on it in concluded contracts, we will consider the full circumstances of each case. Several factors may be relevant for this purpose and the following list is not exhaustive, but will give some indication of the sorts of things we consider:
whether we are satisfied that the contract term may properly be regarded as unfair within the meaning of the Regulations;
the extent and nature of the detriment to consumers resulting from the term or the potential harm which could result from the term;
whether the firm has fully cooperated with the FSA in resolving our concerns about the fairness of the particular contract term.
Regulation 12 states that:
'(1) The [OFT] or [...] any qualifying body may apply for an injunction (including an interim injunction) against any person appearing to them to be using, or recommending the use of, an unfair term drawn up for general use in contracts concluded with consumers'.
'(3) The court, on an application under this regulation, may grant an injunction on such terms as it thinks fit.'
Regulation 8 states that an unfair term is not binding on the consumer but that the contract will continue to bind the parties if it is capable of continuing in existence without the unfair term. Therefore, if the court finds that the term in question is unfair, the firm would have to stop relying on the unfair term in existing contracts governed by the Regulations.