What makes a contract clause unfair?
Companies are not allowed to apply terms and conditions that are unfair for consumers. A term may be unfair if it favours the company to such an extent that the rights and obligations of the two parties are disproportionate. For example, the terms may not be such that the consumer assumes a far greater deal of the risk associated with defects or faults in the products than the vendor.
The most unfair type of contract is one in which the company’s only “obligation” is to receive the stated purchase price and the consumer is left with all the risks. Unfair contract terms may be related to prices, contract duration, delivery times, payments, billing, ways of dealing with defects or opportunities for contract termination or cancellation.
Example of unfair terms and conditions of contract are ones which:
- prevent the consumer from appealing to rights set by law, such as those related to receiving compensation for a defective product.
- limit or prevent the consumer from making use of legal remedies. The consumer always has the right to refer matters to a local district court or to the Consumer Disputes Board.
- reserve the right for the company to change the characteristics or properties of the product unilaterally, without a justifiable reason.
- reserve the right to raise the price of the product without granting the consumer the right to cancel the contract if the increase in price is too high compared to the originally agreed price.
- demand an unreasonable level of compensation from the consumer for breach of contract.
- reserve the right for the company to cancel an ongoing contract without giving sufficient prior notice
- are binding for the consumer without having granted the consumer a proper opportunity to read the terms and conditions prior to entering the agreement.
Negotiations concerning unfair terms of contract
The fact that one clause in a contract (e.g. one relating to the duration of the contract) is unfair does not necessarily render the whole contract null and void. The contract may be amended through negotiation in such a way that the unfair term does not make the entire contract unfair.
Should a specific term be found to be unfair, we recommend negotiating an amendment with the other party. For example, it may be possible to delete the clause in question without affecting the content or validity of the rest of the contract. The amendment may relate, for example, to contractual penalties, cancellation or contract or price. It is possible to void a contract and cancel a purchase if the terms and conditions as a whole are so unfair that it would be unreasonable to expect the consumer to abide by them.