(1)An unfair term of a consumer contract is not binding on the consumer.
(2)An unfair consumer notice is not binding on the consumer.
(3)This does not prevent the consumer from relying on the term or notice if the consumer chooses to do so.
(4)A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer.
(5)Whether a term is fair is to be determined—
(a)taking into account the nature of the subject matter of the contract, and
(b)by reference to all the circumstances existing when the term was agreed and to all of the other terms of the contract or of any other contract on which it depends.
(6)A notice is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations to the detriment of the consumer.
(7)Whether a notice is fair is to be determined—
(a)taking into account the nature of the subject matter of the notice, and
(b)by reference to all the circumstances existing when the rights or obligations to which it relates arose and to the terms of any contract on which it depends.
(8)This section does not affect the operation of—
(a)section 31 (exclusion of liability: goods contracts),
(b)section 47 (exclusion of liability: digital content contracts),
(c)section 57 (exclusion of liability: services contracts), or
(d)section 65 (exclusion of negligence liability).
Cases considering section 62 27
[2024] UKSC 6 · 14 February 2024
An unfair consumer term is not binding. Fairness depends on good faith, significant imbalance and detriment, assessed by the contract’s subject matter, surrounding circumstances and related terms. The provision supported the alternative reasoning that an invalid purported liability is not a reasonably foreseeable contractual loss (see paras [41]; [50]-[52]).
[2024] EWCA Civ 1111 · 3 October 2024Interprets
The Court applied section 62(1) to hold that the unfair payment term was not binding on the consumer and could not be enforced to recover the unpaid balance (see paras [113]-[114]).
The Court applied the statutory test requiring detriment, significant imbalance and contrariety to good faith. The payment term failed that test because it allocated the risk of an ineffective hearing wholly to the consumer (see paras [65]-[76]; [84]-[110]).
The Court assessed fairness by reference to the nature of the subject matter, the circumstances existing when the term was agreed, and the other contractual terms. The assessment was prospective at the date of contracting, rather than confined to what later occurred (see paras [62], [69], [82]-[83]).
The Court took account of the nature of the legal-services contract when assessing whether the payment term was fair, alongside the circumstances at contract formation and the other terms (see paras [25], [69]).
The Court confirmed that fairness is assessed using the circumstances existing when the term was agreed. The possibility that the term would require full payment for services never supplied was therefore relevant even though the actual hearing was adjourned for a different reason (see paras [59], [62], [82]-[83]).
[2024] EWCA Civ 630 · 10 June 2024Limits
Section 62 establishes that unfair consumer terms are not binding and sets the fairness framework. The court held that the guarantee term was not unfair and explained the statutory consequence if the provision applied. (see paras [37] and [126]-[141])
Section 62(1) makes an unfair term non-binding on the consumer. The court treated that consequence as unequivocal and incompatible with enforcing an award on the basis that the term remained binding. (see paras [37] and [140]-[141])
Section 62(4) defines unfairness by reference to a significant imbalance, contrary to good faith, causing detriment to the consumer. The court held that the essential repayment obligation in the guarantee did not satisfy that test. (see paras [37] and [127]-[133])
Section 62(5) requires fairness to be assessed by reference to the nature of the subject matter and all relevant circumstances and terms. The court applied that contextual approach to the corporate guarantee. (see paras [37], [40] and [127]-[132])
Section 62(5)(a) requires the nature of the contract’s subject matter to be considered in assessing fairness. The court treated the guarantee’s essential bargain and substantial corporate financing context as relevant. (see paras [37], [127]-[132])
Section 62(5)(b) requires consideration of the circumstances at agreement and the other contractual terms. The court relied on the standard wording, clarity and stated amount of the guarantee. (see paras [37] and [127]-[132])
7 more judgments, and what each says about section 62, are in the
case-law panel in the full Act.
297.The effect of this section is that terms used in contracts and notices will only be binding upon the consumer if they are fair. It defines ‘unfair’ terms as those which put the consumer at a disadvantage, by limiting the consumer’s rights or disproportionately increasing their obligations as compared to the trader’s rights and obligations.
298.This section also sets out factors that a court should take into account when determining whether a term is fair, notably that it should consider the specific circumstances existing when the term was agreed, other terms in the contract and the nature of the subject matter of the contract. This assessment is known as the ‘fairness test’ (see also section 63 as regards the list of terms that may be used to assist a court when considering the application of the fairness test).
299.For example, a contract to subscribe to a magazine could contain a term allowing the publisher to cancel the subscription at short notice. In deciding whether this is fair or not, the court could consider issues such as whether the subscriber can also cancel at short notice or obtain a refund if the publisher cancels the contract.
300.Subsection (8) explains that terms which are void will still be void regardless of the fairness test explained in this section. Terms which are void may still be subject to the fairness test and found to be unfair, however if they are found to be fair that does not prevent them from being void.
301.This section brings together sections 4 and 11 of the UCTA (for England, Wales and Northern Ireland), sections 17 and 18 of the UCTA (for Scotland), and regulations 5 and 6 of the UTCCRs. This section also implements Articles 3, 4 and 6 of the UTCCD.