Unfair Contract Terms – Business or Consumer?



When a consumer enters into a contract to buy goods or services from a business various terms and conditions are implied into the contract which give the consumer protection, such as the goods will be of satisfactory quality and services will be provided with reasonable care and skill. Where the seller of the goods or supplier of the services attempts to impose conditions which restrict liability, for example, those conditions must be reasonable. If they are seen as “unfair” then the Court will strike them out as being unenforceable.
In business to business contracts the starting point is that the parties are free to negotiate whatever terms and conditions they chose and they can exclude many of the terms implied in consumer contracts.

In the past, deciding whether a supplier has contracted with a “consumer” or a “business” (and therefore whether the conditions of the contract are unreasonable and unenforceable) has sometimes been problematic but a recent High Court case has clarified matters further.

In Overy-v- Paypal (Europe) Ltd the Court decided that a buyer of electronic payment services was not a “consumer” for purposes of the Unfair Terms in Consumer Contracts Regulations despite his main purpose in entering into the contract with Paypal was to use the payment services for his own private consumption. This was because he also had a business purpose for using the services which was not negligible or insignificant.

Of equal importance in the case were the comments of the Judge that where a buyer gives the seller the impression that he/she is contracting for business purposes he/she is not entitled to the consumer protection where the terms are unfair, even if he/she would otherwise have been classified as a “consumer.” 

For more information in respect of the above or the enforceability of contractual terms contact David Tear, Litigation Partner.

David Tear
Partner in Litigation/Dispute Resolution