Competition Watchdog Issues Fair Contract Guidance for Traders

The Competition and Markets Authority (CMA) has issued extensive guidance for traders to ensure their contract terms and notices are fair for customers, and comply with the law.

Applying to all business that deal with customers, the CMA is cautioning that it’s illegal to use unfair contract terms or notices. It states: “You cannot rely on such terms or notices – and you may face penalties if enforcers such as the Competition and Markets Authority (CMA) or Trading Standards take action to stop you from using them.”

Fair Contract Guidance for Traders

Publishing detailed guidance on unfair contract terms, the CMA explains the law (Part 2 of the Consumer Rights Act 2015) and gives examples of terms that are unlikely to be fair.

The guidance applies to terms in contracts between ‘traders’ and ‘consumers’, and consumer notices.

A ‘trader’ is anyone who is acting for the purpose of their trade, business, craft or profession. For example, this could be a sole trader, a legally defined company, a government department or local authority, or a subcontractor.

A ‘consumer’ is someone who is mostly acting for a purpose not relating to their trade, business, craft or profession.

If you use the same contract when dealing both with individual customers and with other businesses, then you still must make sure that the terms comply with consumer law and are fair and transparent.

Terms and Notices

The law covers both contract terms and notices to customers.

A ‘term’ is any wording in a contract that describes your rights or obligations, or those of a customer, when you enter into an agreement with them. It does not need to be written down: it could be agreed verbally.

Terms include those which are stated in agreements, in the small print and negotiated individually with customers.

A ‘notice’ may not be part of your contract, but it relates to the same kind of issues that you would deal with in a contract, including:

• the rights or obligations between you and the customer
• excluding or restricting your liability to the customer

This could be any kind of announcement or other communication, written or not, that the customer is likely to see or hear, such as a banner on a website or within software.

Advising traders to ensure that written terms or notices are transparent, the CMA warns that some wording is not allowed in any circumstances, such as some types of terms that are automatically against the law and can be challenged without needing to prove they are unfair. For example, wording that excludes or limits a trader’s responsibility for the death or injury of any customer or takes away or reduces a customer’s legal rights to services being provided to a reasonable standard.

Covering contract terms about starting and completing work, and varying the price of work, each section of the guidance provides examples of fair and unfair wording.

The CMA is advising traders to review their terms and notices to make sure they are fair and transparent, using the full guidance to ensure they are transparent.

>> Read more of the latest roofing news