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Selling to individuals: are your terms enforceable?

Do your online terms omit or bury any key information?

As more and more purchases are made via mobile phones, it can be tempting to keep wording brief and provide a simple process for your customers – but when selling to individuals, consumer protection laws remain the same even if you’re dealing with limited space and number of characters. 

Unlike business-to-business contracts, when supplying goods or services to an individual consumer there are various rules to bear in mind. Consumers benefit from a range of statutory protections and your contract may not be enforceable if your terms do not comply. This is a complex area and you should take advice on preparing or updating any terms, but we set out below some important principles to remember:

Transparency

The Consumer Rights Act 2015 (CRA) requires a consumer contract to be transparent, meaning it is “expressed in plain and intelligible language and it is legible”. Transparency may look different depending on the target customers: for example, if your terms are aimed at young adults or individuals whose first language is not likely to be English. The presentation of terms will also be taken into account: are the terms in a large enough font size to read and are they arranged in a user-friendly way? 

Traders should avoid using technical legal terms or other complex language that is not likely to be understood by consumers. In particular, terms relating to the subject matter of the contract and pricing must be transparent and be prominently brought to the consumer’s attention.

If a term is not clear it will be interpreted to have the meaning most beneficial to the consumer. These issues were scrutinised in the case of Green v Betfred, when Betfred sought to enforce their online terms against Mr Green to avoid paying out a gaming windfall; Mr Green was successful, with the court confirming that clear language and explicit signposting is needed to spell out onerous terms to consumers and that no individual would reasonably be expected to read long and legalistic agreements.

Fairness

A term is unfair under the CRA 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”.   If a term were to be challenged, the courts would consider all the circumstances existing when the term was agreed and the other terms of the contract, so the concept of fairness will be assessed based on context.

The Competition and Markets Authority (CMA) has issued guidance on unfair terms, including specified terms that will always be considered unfair or are likely to be considered unfair.

If a term is not fair it will not be enforceable. Fairness was another factor going against Betfred in the case mentioned above.

Pre-contract information

Consumer protection laws include making certain details available in advance, such as how pricing is calculated, any additional fees and whether cancellation will be possible. This information must be provided clearly and prominently before the point of order - even if you operate an app or a mobile-specific web page where space may be limited. There is an allowance when operating with limited space (for example, by way of text message) to provide certain details in another appropriate way, but this will not help traders selling via apps or mobile web pages as smartphones will allow for the complete information to be displayed via link or pop-up.

Misleading consumer practices

Consumer law also prohibits aggressive or disingenuous tactics when advertising or selling to individuals. The incoming Digital Markets, Competition and Consumers Act 2024 (DMCCA), due to take effect in phases later this year and early in 2025, will replace the Consumer Protection from Unfair Trading Regulations 2008 but many of the same rules will be preserved.

A ‘commercial practice’ is an act or omission, regardless of when it takes place, that relates to the promotion or supply of goods, services or digital content. Commercial practices are unfair if they would cause the average consumer to make a decision about a purchase that they would not otherwise have made due to:

  • misleading actions or omissions
  • aggressive practices
  • failure to include key information in marketing materials.

Some practices are always considered unfair, such as representing that remedies offered by the trader are a special offer when they are in fact available to consumers by law. The DMCCA will broaden the scope of these rules, including to catch traders who use “drip pricing” tactics to hide unavoidable fees at a late stage in a transaction.  

Breach of these rules may permit consumers to unwind transactions, claim a discount and recover compensation; in serious cases, breach may lead to criminal fines or imprisonment. Once the DMCCA is in force, the CMA will have the authority to take direct enforcement action against businesses that have breached relevant consumer protection legislation without recourse to the courts. The CMA will be able to impose a maximum penalty of 10% of a business's global annual turnover or £300,000 (whichever is higher), as well as fining individuals up to £30,000.

With changes arising from the DMCCA on the horizon, now is a good time to take stock of your online consumer journeys and ensure your business is protected.

For more information, contact our commercial solicitors.

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