Unit 14- Unfair standard terms Flashcards
What are standard contracts
A company which repeatedly enters into certain types of contracts develops its own standard conditions which will be applied in all relationships
What is meant by information asymmetry in standard contracts?
The party offering the contract often has a greater understanding of the terms, conditions and potential risks associated –> shape the terms to their advantage
What are control systems?
Aim to address the potential imbalance of power and protect the interests of the party with less bargaining power
What are the two possible state interventions in control systems?
- Formal control: certain terms in the standard contract must specifically be approved in writing
- Substantive control: evaluates the fairness and unreasonably of provisions within standard contracts
What is an unfairness test
Provides a general test, referring to ‘good faith’ and to a ‘significant imbalance in the parties’ rights and obligations arising under the contract
What is the meaning of ‘contrary to the requirements of good faith’
Look at if we can reasonably assume that the consumer would have agreed to such a term in individual negotiations
What is the meaning of “significant imbalance in the parties’ rights and obligations arising under the contract”
To determine if the rule is unfair take it out form the contract and look at what the default rule would be/what rules of national law would apply – then look back at the contractual term and compare
Consequences of unfairness
Unfair terms shall not be binding on the consumer and the contract shall continue to bind the parties upon those terms if it is capable of continuing in existence without the unfair terms
Consumer protection in regards to unfair contracts
Member states shall ensure that, in the interests of consumers and of competitors adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers
What is meant by individual enforcement in regards to unfair contracts
In cases of individual litigation between traders and consumers, there may be specific procedural rules that deviate from traditional civil procedure –> national court required to examine
Public or collective enforcement in regards to unfair contracts
In situations where there is an imbalance of power between consumers and sellers or suppliers, public authorities or consumer organisations may take action to address the unfair terms.
