Unfair Contract Terms
Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts
I. Sphere of application
- Art. 2: contract between a consumer and a seller or supplier (standard definition).
- A contractual term which has not been individually negotiated, i.e. which has been drafted in advance without the consumer being able to influence the substance of the term, Art. 3(1) and (2).
- The burden of proof for individual negotiation is upon the seller/supplier, Art. 3(2).
II. Unfairness of contract terms
- Art. 3(1): a term is deemed unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.
- Art. 4(1): all the circumstances of the contract and its conclusion shall be taken into account (nature of goods, other terms etc.).
- However, the definition of the essentalia negotii and the quality/price ratio is outside the directive's realm, provided they are stipulated in plain intelligible language, Art. 4(2).
- If the contract is in writing, terms must be drafted in plain, intelligible language (Art. 5).
- If the interpretation of a term is unclear, the interpretation most favourable to the consumer shall prevail. Note: this rule does not apply for representative actions under Art. 7(2), cf. Art. 5 sent. 3.
- Art. 3(3): the directive's Annex contains an indicative and non-exhaustive list of the terms which may be regarded as unfair (so-called 'grey list') - please read!
III. Legal consequences
- Art. 6(1): the unfair term is not binding upon the consumer.
- The remainder of the contract is binding if capable of continuing in existence without the unfair term.
- Representative actions to be allowed by the Member States, Art. 7(2).
IV. Case Law
- Oceano Grupo Editorial SA v. Roció Murciano Quintero
and Pannon GSM
The Court held that (a) an unfair contract term is not binding on the consumer, and it is not necessary for the consumer to contest the validity of such a term,
(b) Courts of the Member States have the power to evaluate whether a specific contract term is unfair of their own motion
and (c) a clause in a consumer contract conferring jurisdiction to the seller's seat may be considered unfair.
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In Mostaza Claro,
the Court held that "a national court seised of an action for annulment of an arbitration award must determine whether the arbitration agreement is void and annul that award where that agreement contains an unfair term, even though the consumer has not pleaded that invalidity in the course of the arbitration proceedings, but only in that of the action for annulment."
This decision was confirmed by the judgement
Asturcom Telecommunicaciones.
- Cofidis
A provision in the law of a Member State which prevents a national court from finding a contractual term in a consumer contract to be unfair
after the expiry of a limitation period, is not compatible with the Unfair Terms Directive.
- Freiburger Kommunalbauten v. Hofstetter
The Court indicated that it will limit itself to interpreting the "general criteria" of the Directive, whereas the
assessment of the fairness of a particular term belongs with the national court.
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