Unfair Terms in Contracts

The current law on unfair contract terms is unnecessarily complicated and difficult to understand. It is covered by two pieces of legislation: the Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contracts Regulations 1999. The two laws contain inconsistent and overlapping provisions, using different language and concepts to produce similar but not identical effects.

In 2001, the Department of Trade and Industry asked the Law Commission and Scottish Law Commission to rewrite the law of unfair contract terms as a single regime, in clearer and more accessible language. We were also asked to consider whether the law should do more to protect businesses, particularly small businesses.

On 24 February 2005 (together with the Scottish Law Commission) we published a final report and draft bill. We recommend a single, unified piece of legislation, which preserves the existing level of consumer protection. We also recommend improved protection for the smallest and most vulnerable businesses (employing 9 or fewer staff). A summary is available.

This follows a joint consultation paper, published in 2002.

In July 2006, the Government told us that it accepts our recommendations, subject to a regulatory impact assessment. If the assessment proves favourable, the Department of Trade and Industry will seek an opportunity to introduce appropriate legislation to implement our recommendations as soon as practicable.