What are ‘Fair Terms’

Terms and conditions indicate what businesses (“traders”) and customers should expect from each other. They need to be ‘fair’ otherwise they can’t be relied upon. But how do we judge terms to be ‘fair’ or ‘unfair’?

By law, a fairness test is carried out to establish that the rights and responsibilities of the trader are not weighted in their favour. However, some terms are exempt from the fairness test. These include terms around the product/service description, legal terms AND the price charged. This means it’s for the customer to decide what is considered a fair price – and at Profit Honesty, we don’t think that’s fair!

Here are some examples of what could be considered fair or unfair terms.

Firstly, to the protect the trader:

  1. If your customer cancels and it’s not your fault. Here, you have the right to protect yourself, but the penalty must be proportionate to what your business is losing as a result.
  2. Damage to your premises or goods not purchased. Customers should be expected to pay for financial losses that they have directly caused, where they are at fault.

And here are terms to the protect the customer:

  1. Excessive charges and financial sanctions. Terms that allow you to impose disproportionately high charges on your customers for breach of contract are likely to be unfair.
  2. If you cancel the contract. You may want to include terms in the contract that allow you to bring the contract to an end. Your terms should not give your business excessive rights to cancel a contract.
  3. Responsibility if things go wrong. Terms which allow you to remove or limit your liability to your customers when you are at fault and things go wrong, are likely to be unfair.
  4. Changing the terms of a contract. If you include a term that gives you the right to change elements of a contract after it has been agreed with your customer, this is known as a variation clause. Variation clauses are likely to be unfair if they have the effect of a ‘blank cheque’, allowing you to adjust an agreed price at your discretion, or to change other important agreed aspects of the contract to suit yourself.
  5. Subscriptions & automatic rollover. Your customer needs to know how long their contract is due to run and how to cancel it (if they don’t want it renewed).
  6. Extending the contract. Terms that can be used to extend a contract beyond what your customer would normally expect, may be unfair.

Contract Terms

Just because terms are written and signed, doesn’t make them legal. A contract term must be fair to be legally binding on your customer. If it isn’t, customers can challenge it – including in court if necessary. Enforcers (such as the Competition and Markets Authority and Trading Standards) can also bring cases to stop you from using it.

Key myths about contract terms include:

  • A trader can cancel a contract, no matter what the circumstances, and state that no refund is available. No, they can’t! If a contract ends due to no fault of the customer, then they will more than likely be entitled to a full refund.
  • Terms can be applied to limit a trader’s liability or reduce a customer’s statutory rights. They cannot do this.
  • Terms used in contracts that have been borrowed or adapted can be considered fair. Not necessarily. What may be applicable to one business, may not be appropriate to another.
  • It’s OK to use legal jargon, even if it bamboozles the customer. No – terms must be clear!

A final note to traders:

Consider how your customer might read and access your contract terms. When writing your contract terms, put yourself in your customer’s shoes and think how they might be interpreted.

Further information:

For more information on all of the above, please visit the official government website:
https://www.gov.uk/guidance/how-to-write-fair-contracts#what-is-unfair