New CMA guidance for businesses on consumer contracts


Recent research from the Competition and Market's Authority (CMA) shows that 54% of UK businesses surveyed don’t fully understand the rules on unfair terms. This puts them at real risk of falling foul of legislation designed to protect consumers.

It seems that it is often thought that consumers don't read the terms and conditions presented to them, whether on paper or online. Given the length of some of these documents perhaps its no surprise that surveys have found most people online simply tick 'read and understood' without further thought, keen to have access to the product itself.

You might wonder if consumers aren't reading the terms of contracts they sign, what is the purpose of these agreements? And are they effective? The short answer is that terms and conditions remain essential in providing protection to businesses and if drafted well, may well help avoid future disputes.

Terms and conditions provide the parameters of the relationship between supplier and consumer and set out the rights and obligations of the parties. While it's important that the terms protect the supplier business, and the product it has invested time and money in developing, there's no advantage in making the terms as long as possible or bombarding people with legalese. The best way to avoid any potential disputes is for the terms to be as clear and unambiguous as possible.

Individual consumers, unlike business customers who can engage in commercial negotiations on an even footing, are protected by rules set out in the Consumer Rights Act 2015 (CRA). The CRA implies certain terms into the contract, for example relating to quality and fitness for purpose, consolidating and enhancing the protection of consumers, and also provides for remedies for wronged consumers.

As for enforceability, according to the CRA a term will be unfair, and therefore not binding on the consumer, if it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer. Importantly, the CRA also specifically states that terms must be drafted in "plain and intelligible language". 

The CMA has now issued new guidance for businesses and it's clear that caution is required. Terms and conditions are a necessity for companies to protect the position and avoid costly legal wrangling. So make sure you get them right.

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The Competition and Markets Authority (CMA) has today published research amongst UK businesses which reveals that 54% of those surveyed don’t fully understand the rules on unfair terms, which directly impacts how they treat their customers. Research for the CMA also revealed that some businesses think a signed contract is final, not realising that they can’t enforce a term against a consumer if it’s unfair. Others may copy terms from larger businesses or competitors, assuming incorrectly that these will be automatically fair and legally binding.
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