Definition of Unfair
Regulation 5(1) defines the principle of unfair:
- If a contractual term has not been individually negotiated and
- the term causes significant imbalance in the parties rights and obligations, then
- the term is contrary to the requirement of good faith.
"Has not been individually negotiated" encompasses terms of which the consumer has not had the opportunity to mould. Terms that have been individually negotiated are outside this regulation, while other contract terms may be within the regulation.
"Causes significant imbalance". For a term to be deemed unfair, this requires the term to be to the detriment of the consumer and benefit the seller or supplier to an excessive degree.
"Contrary to good faith". In the complex case of Director General of Fair Trading v First National Bank, the bank's seemingly unfair interest term was found to be in good faith as the term guarded the bank from a possible situation of receiving no interest defeating their business objective.
Schedule 2 sets out an indicative, non-exhaustive list of terms that would be unfair.
Read more about this topic: Unfair Terms In Consumer Contracts Regulations 1999
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