Avoiding unfair terms in consumer contracts

Part 2 of the Consumer Rights Act 2015 replaced the Unfair Terms in Consumer Contracts Regulations 1999 and sets out when a term in a consumer contract is unfair and therefore unenforceable. The law applies to any written or oral term in a contract between a trader and a consumer.

The central rule (s.62) is that a term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations to the detriment of the consumer. A term that is found unfair is not binding on the consumer - even if they signed the contract and even if you drew their attention to it.

This is not a theoretical risk. The Competition and Markets Authority (CMA) regularly investigates and challenges consumer contracts. From 6 April 2025, the CMA can impose fines of up to 10% of global turnover directly, without going to court, under the Digital Markets, Competition and Consumers Act 2024.

The three-category structure

The Act divides contract terms into three categories, and the rules differ significantly between them.

Always unenforceable (the blacklist)

Certain terms are always void regardless of context or justification. The most important is section 65: a trader cannot exclude or restrict liability for death or personal injury caused by negligence. Any such term is automatically unenforceable, even if the consumer agreed to it in writing.

Similarly, under section 31, traders cannot exclude the statutory rights under Part 1 of the Act (the rights to satisfactory quality, fitness for purpose, and so on). Attempts to do so are void.

Always enforceable (core terms - with conditions)

The Act does not subject the main subject matter of the contract or the adequacy of the price to the fairness test. A consumer cannot argue that a product was unfairly priced. However, this exemption only applies if the term is transparent and prominent (see below). A price term buried in fine print does not benefit from this exemption.

The grey list - potentially unfair terms

Between the blacklist and the exemption sits Schedule 2 of the Act: a list of 20 types of terms that may be unfair. Appearing on this list does not make a term automatically void, but it creates a strong presumption of unfairness. The burden shifts to you to justify why the term is fair in your specific context.

How the fairness test works in practice

When assessing whether a grey-list term is fair, the CMA and courts look at:

• The contract as a whole - a term that looks harsh in isolation may be balanced by other provisions
• The nature of the goods or services - a cancellation fee may be justifiable for bespoke orders but not for off-the-shelf products
• The circumstances at the time - what a reasonable trader would have included in a similar contract
• Whether the consumer had a genuine choice - take-it-or-leave-it standard terms face harder scrutiny

Examples: unfair versus fair versions of common terms

Cancellation fees (grey list item 5)

Unfair: "If you cancel for any reason, you forfeit your full deposit regardless of when you cancel or whether we suffer any loss."

Fair: "If you cancel more than 14 days before delivery, we retain a 15% deposit to cover our administration costs."

Unilateral variation (grey list item 10)

Unfair: "We may change these terms at any time without notice."

Fair: "We may amend these terms with 30 days' written notice. If you do not accept the change, you may cancel without penalty."

Automatic renewal (grey list item 8)

Unfair: "Your subscription renews annually. To cancel, you must give 90 days' notice before the renewal date."

Fair: "Your annual subscription renews on [specific date]. We will remind you 30 days before. You can cancel any time before renewal."

The transparency requirement

Even if a term passes the fairness test, it must still meet the transparency requirement under section 68. This applies to all written consumer contract terms, not just those on the grey list.

What transparency means in practice

Transparency is more than avoiding legal jargon. The CMA looks at the overall presentation:

• Language: Can an ordinary person understand it? Avoid double negatives and passive constructions.
• Structure: Are the most important terms easy to find?
• Timing: Are terms presented before the consumer commits?
• Format: Are terms legible? Small print or low-contrast text may not satisfy the requirement.

The interpretation rule in section 69 provides an additional incentive for clarity: if a term is ambiguous, the meaning most favourable to the consumer applies.

What happens when a term is found unfair

An unfair term is not binding on the consumer (s.62(1)). However, the rest of the contract continues in force if it can subsist without the unfair term:

• An exclusion clause is removed, leaving you without the protection it was meant to provide
• A cancellation fee term is void, meaning the consumer owes you nothing on cancellation
• An automatic renewal clause is void, meaning the consumer is not bound by the renewal

In addition to private enforcement by consumers, the CMA and Trading Standards can take action to have unfair terms stopped across an industry, not just in individual cases.