Unfair Terms in Contracts

Status: This project is complete. Government has accepted our recommendations in principle.

The current law on unfair contract terms is unnecessarily complicated and difficult to understand. It is covered by two pieces of legislation: the Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contracts Regulations 1999. The two laws contain inconsistent and overlapping provisions, using different language and concepts to produce similar but not identical effects.

In 2001, the Department of Trade and Industry asked the Law Commission and Scottish Law Commission to rewrite the law of unfair contract terms as a single regime, in clearer and more accessible language.We were also asked to consider whether the law should do more to protect businesses, particularly small businesses.

The project

On 24 February 2005, working with the Scottish Law Commission, we published a final report, Unfair Terms in Contracts, and draft Bill.  We recommend a single, unified piece of legislation, which preserves the existing level of consumer protection. We also recommend improved protection for the smallest and most vulnerable businesses (employing 9 or fewer staff).

Our report followed a joint consultation exercise, which we held in 2002.

In July 2006, the Government told us that it accepts our recommendations, subject to a regulatory impact assessment. In 2011 Government confirmed that implementation of our recommendations is on hold pending negotiation of the draft EU Consumer Rights Directive, which are expected to conclude late in 2011.

Unfair Terms in Consumer Contracts

In May 2012, the Department of Business, Innovation and Skills asked the Law Commission and Scottish Law Commission to review and update the recommendations made by the two Law Commissions in their 2005 Report on Unfair Terms in Contracts in so far as they affect contracts made between businesses and consumers.

In March 2013 we published an advice paper, Unfair Terms in Consumer Contracts: Advice to the Department of Business, Innovation and Skills. The Consumer Rights Bill 2014 implements our recommendations in the advice paper.  Read more about the Consumer Rights Bill 2014 and unfair terms in consumer contracts.