Contract Exam, The first question discusses Section 62 of the Consumer Rights Act 2015, the tests of transparency and fairness, fair and unfair contract terms. The second questions covers implied terms.
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1
, Module Code: LW650
Examination number: 213183
2
Question Number
Section 62 of the Consumer Rights Act 2015 requires that a contract term or
notice be fair. If unfair, the term or notice will not bind a consumer 1 – but doesn’t
prevent them from relying on it if they choose to. 2 S.62(4) states that a term will be
unfair if “contrary to the requirement of good faith, it causes a significant imbalance
in parties’ rights and obligations under the contract to the detriment of the
consumer.”3 To decide whether a term is unfair, the court must take into account the
“nature of the subject matter”4 of the contract, the circumstances that existed when
the term was agreed to, and any or all of the other terms of the contract. Courts may
also refer to another contract on which the contract in question depends. A notice will
also be unfair if “contrary to the requirement of good faith, it causes a significant
imbalance in parties’ rights and obligations under the contract to the detriment of the
consumer.”5 In deciding whether a notice is unfair, like with a term, the court will
consider the nature of the notice’s subject matter, the circumstances existing when
“the rights or obligations to which it relates arose,” 6 and terms of the contract on
which the notice depends.
The term ‘significant imbalance’ involves considerations of the term’s
substantive fairness, judged in the context of contract terms as a whole. A significant
imbalance will be found, as stated by Lord Bingham, if “a term is so weighted in
favour of the supplier,”7 it would “tilt the parties’ rights and obligations under the
contract significantly in his favour.” 8 This would place the consumer in a position that
is worse than the law would intend. Whether a term causes a significant imbalance
can be linked to whether the trader has acted in good faith. To assess this, there is a
requirement of openness, transparency, and fair dealing. The requirement of
openness was described by Lord Bingham in The Director General of Fair Trading v
1
Consumer Rights Act S.62(1) & (2)
2
Ibid. S.62(3)
3
Ibid. S.62(4)
4
Ibid. S.62(5)
5
Ibid. S.62(6)
6
Ibid. S.62(7)(b)
7
Director General of Fair Trading v First National Bank [2001] UKHL 52, [2002] 1 AC 481
8
Ibid.
2
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