The Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083) is an old UK statutory instrument, which had implemented the EU (then EEC) Unfair Consumer Contract Terms Directive 93/13/EEC into domestic law.[n 1] It replaced an earlier version of similar regulations,[n 2] and overlaps considerably with the Unfair Contract Terms Act 1977.
The scope of the Directive is rather limited, seeking merely to harmonise rather basic consumer rights across the EU. In the UK, these 1999 Regulations work to render ineffective terms that benefit seller or suppliers against the interests of consumers. They also have provisions specifically covering standard form contracts.
The Regulations overlap somewhat with the Unfair Contract Terms Act 1977 which deals specifically with exemption clauses. The Directive set out requirements that in many ways are narrower than rules already in place in English law. It does, however, extend the scope of terms which can be rendered ineffective; especially when dealing with unfair terms that do not constitute exemption clauses.
There was some criticism in legal circles that the UK government had not bothered to repeal and reenact the 1977 Act to embrace the Directive. It has been said the Regulations "sit atop the Act like an ill-fitting wig". The 1994 Regulations were declared an insufficient implementation of the Directive, and had to be replaced by the 1999 Regulations; but once again, the opportunity to consolidate the law into an updated Unfair Contracts Terms Act was missed.
Definition of "unfair"
Regulation 5(1)[n 3] defines the principle of unfair:
- If a contractual term has not been individually negotiated[n 4] 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.[n 5]
"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.
Effect of the "unfair" term
Regulation 8 provides that an unfair term "shall not be binding upon the consumer".
The contra proferentem rule
The contra proferentem rule is that where there is any ambiguity in regards to a clause it is to be interpreted against the party which insisted on including it. Regulation 7 states this very clearly:
(1) A seller or supplier shall ensure that any written term of a contract is expressed in plain, intelligible language.
(2) If there is doubt about the meaning of a written term, the interpretation which is most favourable to the consumer shall prevail but this rule shall not apply in proceedings brought under regulation 12.
- Unfair Contract Terms Act 1977
- European Directives
- Statutory Instruments
- Office of Fair Trading v Abbey National and Others (2008)
- Director General of Fair Trading v First National Bank plc  UKHL 52
- Implemented under the European Communities Act 1972. See also, (1993) L95 OJ 29.
- See The Unfair Terms in Consumer Contracts Regulations 1994
- "A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer"
- Regulation 5(2)
- Regulation 8(2)
- Lyons, Trevor - Contract Law - Staffordshire University 1994
-  3 WLR 1297
- McKendrick E. (2009 p.161) Contract law. 8th edn. Basingstoke: Palgrave Macmillan