Unfair Standard Terms

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					                              Unfair Standard Terms
                         A Guide for Care Home Providers

         The Unfair Terms in Consumer Contracts Regulations 1999

Businesses using contracts with standard terms and conditions can sometimes place
consumers at a disadvantage. These regulations seek to redress this imbalance of power,
recognising the inability of consumers to individually negotiate their own conditions in such
contracts. They aim to prevent the use by businesses, in their standard form agreements
with consumers, of terms that may be regarded as unfair to the consumer. If a term is found
to be unfair, it is unenforceable. The remainder of the contract will be unaffected.

In assessing what is fair or unfair, the Regulations are concerned to ensure that the rights of
both parties are similar. If the parties’ rights are significantly unequal, then the Regulations
look at whether any detriment may be caused to the consumer.

Businesses that use plain and intelligible language so that the terms are easily understood,
and those who follow industry codes of practice, are less likely to find that their terms and
conditions fall foul of the Regulations.

This fact sheet summarises the main provisions of the Regulations, but should not be taken
as an authoritative statement of the law.

Which terms do the Regulations apply to?
The Regulations apply to all contracts between consumers and a seller or supplier acting for
the purposes of their business. This means the Regulations will apply to all standard contract
terms issued by care homes for privately funded consumers (including those who are topping
up from Local Authority funding).

Which terms are not covered by the Regulations?
The Regulations do not apply to contract terms between care homes and other providers,
such as Local Authorities, because the consumer is not a legal party to the contract. Terms
that set the price or describe the main subject matter of the contract (core terms) are also
exempt provided they are in plain and intelligible language. However it should be absolutely
clear when the fees are due, the period charged for, the basis of the calculation and where
appropriate the arrangements needed if private funding runs out.

Other terms that are not covered are:

       Terms reflecting the law
       Specially negotiated terms
       Terms in business to business agreements
       Terms in sales by private individuals
       Terms in non-consumer contracts

What is unfair?

A contractual term is unfair if it creates a significant imbalance in the parties’ rights and
obligations under the contract, to the detriment of the consumer, contrary to the
requirement of good faith.

Such terms all have the aim or effect of reducing the consumer’s rights under the ordinary
rules of contract or the general law. They may either stop consumers from making certain
sorts of legal claim against the business which they could otherwise have made, or give the
business rights against the consumer that it would not otherwise have had.

The requirement of good faith is based on the notion that businesses should deal fairly and
equitably with consumers, respecting their legitimate interests.

The requirement of plain language

Regulation 7 requires that plain and intelligible language is used in consumer contracts. A
term is open to challenge as unfair if it could put the consumer at a disadvantage because he
or she is not clear about its meaning – even if its meaning could be worked out by a lawyer.

Contract terms should also be in legible print appropriate for the end user (ie consideration
should be given to producing contracts in larger print type or Braille).

The effect of unfairness on the contract

If a term is unfair it is not legally binding on the consumer. If a business refuses to accept that
a term is unfair, the consumer can ask for the help of the Office of Fair Trading or other
qualifying bodies such as Trading Standards who can act to protect consumers in general by
seeking to prevent the continued use or recommendation of unfair terms. Other powers allow
enforcement bodies to apply for injunctions under the Enterprise Act 2002 in any county court.

A consumer can also go to court where it can be decided whether the business is allowed to
rely on that term or not.

Terms that may be unfair
The following outlines the main types of unfair terms and where appropriate relevant
examples that may be challenged, with appropriate alternatives.

1. Excluding or restricting liability for death or injury

A contract term cannot legally disclaim responsibility for death or personal injury caused by
negligence. These terms are always void. Terms that seek to exclude liability for personal
injury should set out clearly the care home’s liability for breach of duty, whether this arises by
statute or in any other way.

“The home cannot accept responsibility for accidents or personal injury caused to the

“The Home shall not be responsible for accidents or personal injury suffered to the resident
unless the home has been negligent or has breached any duty it may owe (either arising
under the contract or by virtue of any other duty imposed or implied by law)”.

2. Exclusion or restricting liability for breaches of contract

Terms are likely to be considered unfair if they have the effect of excluding or limiting the legal
rights of the consumer in the event of total or partial non-performance of the contract. For a
contract to be fully and equally binding on both supplier and consumer, each party should be
entitled to full compensation if the other fails to fulfil its obligations.

“The Home shall not be held responsible for the damage or loss to clothing or property”.

“The Home shall not be responsible for damage or loss to clothing or property unless the
home has been negligent, fraudulent or breached any agreement in respect of the resident’s
3. Non-returnable consumer pre-payments

When a contract is cancelled consumers should not generally end up paying for something
they have not received. When a consumer causes the cancellation, pre-payments should not
be retained beyond what is needed to cover reasonable losses and costs that the Home
suffers as a direct result.

“The home will not refund any money in the event that the contract is cancelled”.

“In the event that the contract is cancelled by the resident, the Home is entitled to recover any
reasonable losses and costs suffered. Equally where the Home cancels the contract, the
resident is entitled to recover any pre-payments for services not yet supplied”.

4. Financial Penalties

Terms may be unfair if they have the effect of requiring any consumer who fails to fulfil his
obligation to pay a disproportionately high sum in compensation. A care home is legally
required to take reasonable steps to mitigate its loss. A requirement to pay excessive interest
on fee arrears above the normal bank base rate is likely to be unfair.

“Interest will be charged at 10% per month on any outstanding payment”.

“Where there is a failure to pay fees within 14 days, the Home reserves the right to add
interest to the fees outstanding at 3% per year above the Bank of England base rate”.

5. Unequal Cancellation Rights

Terms that give wide cancellation rights to a home are liable to be considered unfair unless
consumers have equal freedom to opt out of the contract. A term that allows a home to cancel
to suit its own financial advantage, or for trivial reasons, would be open to challenge if the
consumer suffers loss or inconvenience. The grounds on which an agreement can be ended,
as well as the arrangements for refunding fees, should be clearly and prominently stated.

“In the event of death we require the resident’s bedroom to be cleared within 48 hours. In the
event of death the home reserves the right to withhold or charge for a period of four weeks”.

“If property belonging to the resident remains in the room following death or departure, the
Home shall be entitled to charge a daily rate for five days, and for a further five days where
the presence of the property is preventing the room being used for another resident. If
property is still not removed after this time the home shall be entitled to make a reasonable
charge for storage”.

6. Supplier’s right to vary terms generally

Terms enabling a care home to unilaterally vary agreed contract terms (even with a notice
period) without the consumer’s consent are likely to be unfair. The right to vary should be
supported by a valid reason eg the home can no longer provide care or to improve the
service. A right to vary should not take effect before the consumer has been able to cancel
the agreement without penalty.

“Fees can be increased by the home from time to time”.

“Following a review of the resident’s care needs, fees may be increased or decreased. The
Home shall give four weeks notice of any such fee change. If the revised care costs are too
high the resident may also give 4 weeks notice of their intention to cancel the contract”.
7. Binding consumers to hidden terms

Consumers should have the opportunity to read and understand contracts before agreeing to
them. Care homes should ensure that their contracts are printed legibly and include all the
terms of the agreement.

8. Legalistic Terms

Terms that are complex and difficult to understand will be construed in favour of the consumer
where there is doubt about its meaning. This means using words in their normal sense and
avoiding jargon eg “jointly and severally liable, indemnity and waiver of surety”. A cooling-off
period where the consumer can withdraw from the contract without penalty is likely to make
the terms fairer since consumers have an opportunity to reflect on what is being offered.

It must be stressed that ultimately it is for the Courts to decide whether or not a term is unfair.
The guidance contained in this leaflet is given only as a summary of the Regulations. Any
business that is concerned that its standard terms and conditions may contain an unfair term
is urged to seek legal advice as to whether the term requires amending or deleting.

This factsheet is designed to give you general advice. It is not a
statement of law and should not be interpreted as such. For further
details, please telephone:

                       Business Advice Line       (01372) 371737
                       Fax                        (01372) 371704
                       TYPETALK calls welcome
                       Web Site

                       Surrey County Council
                       Trading Standards
                       Mid Surrey Area Office
                       Bay Tree Avenue
                       Kingston Road
                       Surrey KT22 7SY

This information may be made available in an alternative language, large print, Braille, or on
audio tape and computer disk.