The Competition and Markets Authority (CMA) has recently launched its “Small Print. Big Difference” campaign to encourage all travel and holiday businesses to review their contracts and notices and check they are fair. The campaign reminds businesses that unfair terms are not legally binding on customers and cannot be relied on.

The Consumer Rights Act 2015 (“CRA”) requires all terms in consumer contracts to be fair. The term ‘consumer contract’ includes written terms and conditions and consumer notices, and terms given orally by a salesperson.  The CRA applies a “fairness test”, which essentially looks at whether the term in question causes a significant imbalance between the customer and the trader.  The fairness test is applied by looking at the term in the overall context of the contract including:

• the nature of what is being sold;
• how the term relates to the rest of the contract; and
• the circumstances at the time the contract was agreed.

The overall question to be asked is, ultimately, “is this term fair?”

Some terms may be exempt from the fairness test if they are:

• describing the main subject matter of the contract or are setting the price; (provided they are clear and prominent); or
• are required by law (if their effect is easily understood by customers).

In certain circumstances, applying the fairness test will not be relevant because a term is simply ‘blacklisted’ by the CRA as being unsuitable for use with consumers in any circumstances. Such terms include those excluding a trader’s liability for death or personal injury caused by its negligence, or those excluding customers’  statutory rights and remedies.

In addition to satisfying the fairness test, all contract terms and notices must be transparent. This essentially means terms must be legible and must set out each party’s rights and obligations fully and are easy to understand.

Terms which the CRA considers may be unfair, depending on the circumstances, are set out in a (non-exhaustive) “greylist” (at Schedule 2 of the CRA). These include terms which:

• inappropriately exclude or limit the legal rights of the consumer in the event the trader fails to comply with, or properly fulfill, its contractual obligations;
• impose disproportionately high charges when a consumer cancels the contract. Any amount charged should reflect the costs which the company is unable to recover;
• allow the trader to unilaterally alter the services to be provided without providing the customer with a valid reason; and
• allow the trader to determine the price after the consumer is bound.

There are some easy steps you can take to help ensure your terms are fair and can be relied on. These include:

Step 1: Read your contracts

This sounds obvious, but many businesses do not thoroughly read their terms or notices. Some things to think about include:

• Would you like to sign up to the terms?
• Have you hidden important wording away or used small print? Make sure you draw terms which may have a particular impact on the customer to their attention.
• Do you use legal language or jargon? Use plain language an ordinary person would understand – put yourself in the shoes of your consumer and make sure the language is appropriate.
• Is the contract clearly set out and easy to follow?
• Do you allow your customer enough time to read and understand the terms before the contract is made?

Pay particular attention to wording which:

• limits the extent of your liability;
• transfers risks on to the consumer they can’t control;
• allows you to make changes to the contract;
• imposes financial sanctions (for instance by charging cancellation fees) or allows you to keep prepayments; and
• automatically renews the contract.

Step 2: Keep an eye on guidance

As part of its ‘Small Print. Big Difference’ campaign, the CMA has issued guidance for businesses, including short explainer videos and more detailed formal guides. These are available on its website at https://fairterms.campaign.gov.uk/. There may also be industry specific guidance issued by the applicable trade/regulatory body (e.g. ABTA for the travel industry).

Step 3: Seek advice

If you are in doubt about any specific terms, you should seek legal advice as soon as possible. Please contact Matthew Pryke if you would like further information on how Hamlins may be able to assist you.