Unfair contract terms

Fair terms and conditions

The terms and conditions in consumer contracts must be fair. The business must act in good faith, and the contract can’t be significantly imbalanced in favour of the business.

Consumer law explains how to test terms that may be unfair. The test is based on the principles of good faith and transparency.

The subject matter of the contract, whether it is transparent, the circumstances relating to how the contract was agreed and the other terms of the contract (and any related contract) will be considered when deciding if a contract term is fair.

When is a contract significant imbalanced?

A term should not give a significant advantage to a business without providing an equal benefit to a consumer. When deciding if a significant imbalance exists in the contract, all of the contract and the circumstances of its agreement are considered. If other terms in the contract significantly benefit the consumer, they may prevent a contract term being declared unfair

What does good faith mean?

This means that a business must meet good standards of commercial practice and morality. Among other things, a business must not take advantage of a consumer’s need for a particular product/service, their lack of experience or weak bargaining position.

The following are considered when assessing good faith:

• Whether the seller or supplier had more power than you when the contract was made
• If you were offered something to agree to the term, like a discount or payment
• If the product or service was made or changed to suit your request
• Whether the seller or supplier treated you fairly
• Whether the seller or supplier took your interests into consideration

What does transparency mean in practice?

The business should be open and transparent when dealing with a consumer and the terms in a contract should be:

• in plain language that an average consumer can understand
• available in one location and identifiable as the terms of the contract
• easy to read and well laid out with no hidden ‘small print’
• made available to the consumer so they have a reasonable opportunity to become acquainted with it 
• highlighting any new or onerous parts
• clearly showing any costs involved

What does concise, plain and understandable language mean?

Contract terms must make sense to the average consumer. They must also be explained in a way that a consumer can understand the financial consequences of each term. This allows consumers to make an informed choice on whether or not to enter into the contract.

Businesses must take particular care with complex and technical terms. A business cannot assume that the consumer understands the detail of how a particular sector operates. The business must give enough information to ensure that the consumer can understands the words used but also the practical implications of any onerous terms and how they relate to any other rights and obligations.

Contract terms should not be ambiguous. Where a term is open to interpretation, the interpretation most favourable to the consumer will be used.

What contract terms are automatically considered unfair in Ireland?

Irish consumer law lists certain contract terms that are automatically considered unfair and cannot be enforced (the 'black list'). It also lists other terms that may be unfair depending on the context (the 'grey list').

Consumers are protected from terms that limit legal rights, impose unfair penalties or give a business an unfair advantage in the contract.

Which terms are automatically considered unfair?

1. A term that excludes or limits the liability of a business when a consumer dies or suffers serious injury due to the business’s actions/omissions.
2. A term that requires a consumer to pay for goods/services they did not receive.
3. A term that imposes a burden of proof on a consumer that the law says should be with a business.
4. A term that prevents or limits a consumer’s right to take legal action or exercise a legal remedy, for example by requiring the consumer to take disputes to arbitration that is not governed by law.
5. A term that requires a consumer to bear their own costs for arbitration.
6. A term that gives a business the sole right to decide that goods/services conform to the contract.
7. A term that gives a business the sole right to interpret any contract term.
8. A term that gives the business a shorter notice period to end the contract compared with the consumer.
9. A term that grants authority to settle disputes only to a court where the business is based even though the consumer does not live there.

What contract terms might be unfair?

Consumer law outlines terms that might be unfair in a ‘grey list’. These terms are listed below. Consumer law requires that these terms go through an assessment to establish if they are unfair.

The list below is a guide. It is not a complete list of the contract terms that may be unfair.

Which terms require assessment for fairness?

1. A term that prevents/limits a consumer’s legal rights when a business does not, or does not fully, perform their contractual obligations.
2. A term that makes an agreement binding on the consumer but makes providing the goods/services subject to the business’s will alone.
3. A term where a business can keep payments from the consumer when the consumer ends the contract but does not grant the same type of compensation to the consumer if the business ends the contract.
4. A term where the consumer must pay the business a high level of compensation for goods/services they have not supplied when the consumer ends the contract.
5. A term where the consumer must pay the business a high level of compensation when the consumer does not meet their contractual obligations.
6. 6 (a) A term where a business can end a contract on a discretionary basis (for no specific reason), but the same option is not available to the consumer (b) A term where a business can keep payments for goods/services that the consumer has not received when the business ends the contract.
7. A term where a business can end a contract of indefinite duration without reasonable notice, except when there are serious grounds for doing so.
8. A term when the consumer ends the contract that allows a business to keep a payment owed to a third party as part of a contractual obligation or mandatory statutory/regulatory provision.
9. A term that automatically extends a contract of fixed length when the consumer does not say otherwise, where there is an unreasonably early deadline for the consumer not to extend the contract.
10. A term that binds the consumer to terms they had no real opportunity to understand fully before the contract was agreed.
11. A term that allows a business to alter the terms of the contract without a valid reason that is specified in the contract.
12. A term that allows a business to alter any characteristics of the goods/services covered in a contract without a valid reason.
13. A term where, after the consumer has agreed the contract, a business can decide the price where no price, or method of calculating the price, had been agreed with the consumer before the contract was agreed.
14. A term that allows the price to be decided at the time of delivery or supply or a term where the business can increase the price without giving the consumer the right to cancel the contract if they decide that the price rise is too high.
15. A term that limits a business’s liability for commitments provided by its agents by making the commitments subject to a particular formality
16. A term where the consumer must fulfil all their obligations when the business does not perform their obligations.
17. A term where a business can transfer contractual rights and obligations that may reduce the consumers guarantees, without the agreement of the consumer.
18. A term that requires a consumer to pay a fee to exercise a statutory right.
19. A term where the consumer must have a valid reason before they can obtain repairs or spare parts from another business.
20. A term that imposes disproportionate requirements on the consumer when they want to end a contract.
21. A term where the consumer must make excessive advance payments or provide excessive guarantees on the performance of future obligations.
22. A term that restricts the information the business provides to the consumer on the performance of the contract.
23. A term that requires the consumer to restrict their rights as data subject under the Data Protection Acts 1988 to 2018, or the General Data Protection Regulation.

What makes a contract term transparent?

When considering is a term is transparent the following points are taken into account:

• The contract subject matter.
• How the contract is communicated and presented to the consumer.
• Other terms of the contract or of any other contract on which it is dependent.
• Provision of all required information as set out in legislation before concluding the contract.

What can you do about an unfair contract term?

If you feel that a term in a contract is unfair, you should contact the business and ask them to address your concerns. You can also take legal action to challenge the term. Unfair terms can be deemed invalid, meaning they cannot be enforced against you.

If your query is about an unfair term in a nursing home contract you can read more in our nursing home guidelines.

You can also report your issue to us . Your report will help to inform our advocacy and enforcement work.