As the name suggests, the Consumer Rights Act 2015 (CRA) deals with contracts between traders and consumers. A consumer is defined as an individual acting for purposes wholly or mainly outside of a business. Amongst other things CRA ‘blacklists’ certain terms and notices, making them unenforceable in all circumstances, without any need to assess them for fairness.
CRA also outlines certain types of terms and notices that are open to challenge, such clauses are subject to a fairness test. These are known as 'grey list' terms that are potentially unfair. Amongst the possible consequences for a business using unfair terms is that any term found to be unfair is declared invalid and unenforceable.
In a recent case the Court of Appeal (CoA) held that an advance payment term in an agreement between two barristers and their former client was unfair and unenforceable under the Consumer Rights Act 2015 (CRA).
A client had instructed barristers on a public access basis, that is to say they had instructed them directly as opposed to through a solicitor. In the barrister’s terms and conditions the payment term provided that the advance fee for a hearing was still payable in full "if the hearing concludes early or is adjourned ... or does not go ahead for any reason beyond our control". When the defendant's (D) trial was adjourned, she terminated the barristers' instructions and refused to pay the outstanding fees.
The CoA decided that:
- Generally the Consumer Rights Act does not always apply to “core” terms, such as the price. It’s for this reason that one cannot buy a TV for £500, then see the same TV in the sale 2 weeks later, and claim that it was unfair for them to have sold it to you at the higher price. However, although the CRA does not permit the adequacy of the contractual price to be assessed for fairness, the exemption is a narrow one. In the case this aspect of payment term did not express the substance of the bargain, but was rather an incidental term and as such it could be challenged under CRA.
- The payment term fell within the grey list of potentially unfair terms in the CRA. It had "the effect of requiring that, where the consumer decides not to conclude or perform the contract, the consumer must pay the trader a disproportionately high sum for services which have not been supplied".
- For the purposes of the fairness test, the payment term in this case created a significant imbalance in the parties' rights and obligations because it purported to force the client to pay in full, regardless of how far in advance it became clear that the hearing would not go ahead, and even if this was not the client's fault. There was an absence of good faith (as required for a finding of unfairness) because the payment term was not one a consumer would have agreed to in negotiations. The fact that she had read the contract and agreed to it was insufficient. It’s for this reason, for example, that a hotel’s terms and conditions, if properly drafted, should recognise a difference between a scenario whereby a customer cancels a reservation 6 months in advance, as opposed to the night before, and adjusts the consumer’s remedies and rights accordingly.
Based on the above, it’s reasonable to assume that a clause that had allowed the barrister to recover their actual losses (varying according to when their instructions were terminated) would have been much more likely to have survived the fairness test than one in which the full amount was due regardless.
This case serves as a useful reminder that anyone in business can fall foul of these rules, and that proper thought should be given, and advice sought where necessary, as to how fair, reasonable and balanced their terms and conditions are when dealing with consumers.