This will be relevant to you if your business sells goods or supplies services of any kind to consumers. This is particularly pertinent to businesses which have previously not been subject to similar consumer protection provisions, such as insurers.
The Fair Trading (Amendment) Act 2001 (Appointed Day) (No. 2) Order 2014 brings into effect amendments to the Consumer Protection Act 1991 (CPA) which were originally approved by Tynwald in 2001 but never brought into effect. The new provisions in the CPA are almost identical to the UK Unfair Terms in Consumer Contracts Regulations 1999.
The amended CPA applies even where the contract contains a term which applies or purports to apply the law of a country or territory other than the Isle of Man, although there is an exception to this where the contract has a close connection with that country or territory.
The amended CPA now includes a schedule of terms which may be considered unfair and general provisions about fairness in contracts, which are, in summary:
a contract which has not been individually negotiated shall be regarded as unfair if it causes a significant imbalance in the parties’ rights and obligations arising under the contract, which is to the detriment of the consumer and cannot be justified;
standard terms and conditions of a business are always open to assessment as to fairness;
where there is doubt in the meaning of a written term, it will be interpreted in favour of the consumer;
a contract should be framed in “plain and intelligible language”; and
an “unfair” term does not bind the consumer.
“Fairness” is assessed having regard to: the nature of the goods or services supplied; all the circumstances attending the conclusion of the contract; and all the other terms of the contract and any other contract on which it is dependent. Provided that terms are framed in plain and intelligible language, the assessment of the fairness does not have regard to the basic scope of the contract (the goods or services supplied) or the adequacy of the price payable in exchange for them. Writing terms in “plain and intelligible language” can of course be difficult.
The non-exhaustive list of unfair terms in the new schedule to the CPA includes terms concerning: the exclusion or limitation of liability; termination rights; variation of terms; compensation payments; and limitation of the consumer’s rights. Fairness of such terms is likely to depend upon the corresponding rights given to the consumer and the effect that the term may have upon the consumer.
As a result of the amended CPA consumers are not bound by terms which are deemed to be “unfair”. The contract between the seller or supplier and the consumer is not rendered void by the inclusion of an unfair term, but continues to bind the parties so far as it is capable of continuing in existence without the unfair term(s). Consequently it is important to ensure that all terms in a contract comply with CPA to ensure certainty of enforceability. It is also vital that key terms, such as termination rights, are fair so that they may be relied upon, rather than a contract continuing without the seller or supplier having the rights they anticipated when offering the contract to the consumer.