Majority of UK firms don’t understand 'unfair' T&CsConsumers losing out because companies don’t know the law

26 October 2016

close look at contract

More than half of UK businesses don’t fully understand the rules on terms and conditions, and customers could be getting hit in the pocket, research has found.

The Competition and Markets Authority (CMA) has today published research revealing that 54% of UK businesses don’t fully understand the rules on unfair terms, which directly impacts how their customers are treated.

The CMA research shows that less than half of the companies it surveyed claimed to have a good understanding of the rules on unfair terms, whereas 36% owned up to not having a strong grasp and 18% admitted that they had never heard of them at all.

It also found that some businesses think a signed contract is final, not realising it can’t enforce a term against a consumer if it’s unfair.

Others confessed to copying terms from larger businesses or competitors, incorrectly assuming that these will automatically be fair and legally binding.

Use our guide to your rights if you think there's an unfair term in your contract.

Consumer rights protections

The rules on using unfair terms are set down in the Consumer Rights Act 2015 (CRA). Most concerning was that only 15% of companies surveyed said they were familiar with the act when asked.

The CRA replaced some major pieces of consumer legislation last year, including the Sale of Goods Act, the introduction of which was heavily promoted by the government's now-defunct Department for Business Innovation and Skills.

The act sets out the legal framework for many rights we take for granted, including the return of faulty goods, delivery rights and the supply of a service.  

What is an unfair term?

Unfair terms are those that give businesses an unfair advantage over consumers, often by reducing their rights or ability to complain if things go wrong.

For example, an unfair term could be:

  • keeping all of a customer’s deposit if they cancel, regardless of the amount the business is actually losing as a result
  • using excessively long notice periods that end up tying customers into a contract for longer than they want
  • excluding the business’ liability for things that are its fault, such as delays, faulty goods or poor service.

In general, companies are free to use whatever contractual terms and conditions they consider to be reasonable. But these terms and conditions cannot be unfair.

Director of Communications at the CMA Paul Latham said: ‘Consumers have a right to be treated fairly – and businesses need to know that they can’t rely on their terms and conditions if they’re not fair.'

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