“It's an unfair cop!” – exploring the world of unfair contract terms for charities.
In the world of charity work, contracts are an essential part of daily operations. Whether they're entering into agreements with beneficiaries, suppliers, service providers, or even donors, it's crucial for charities to understand the implications of the terms within these contracts.
One area that often causes confusion and potential issues is the concept of unfair contract terms. This article aims to shed light on what constitutes an unfair contract term under English law and how it might apply to charities.
What are unfair contract terms?
Unfair contract terms are provisions in a consumer contract (i.e. a contract between a business and an individual consumer/trader) that create a significant imbalance in the rights and obligations of the parties involved, to the detriment of one party. These terms are often found in standard form contracts, where one party has little or no ability to negotiate the terms. The Consumer Rights Act 2015 is the primary legislation governing such unfair contract terms in England. In the event that a party breaches the terms of the Act, they can be liable to pay damages to the other contracting party, as well as to suffer from reputational damage.
Contracts entered into between charities and a consumer/trader (for example a contract with a beneficiary) may be caught by the provisions of the Act. Examples of such contracts include:
- Service Agreements: Charities often enter into service agreements with individuals to provide specific services, such as counselling, educational programmes, or health services. These contracts outline the scope of services, fees, and terms of service.
- Membership Agreements: Many charities offer membership programmes where individuals pay a fee to become members and receive certain benefits, such as access to exclusive events, newsletters, or discounts on services.
- Event Participation Contracts: Charities frequently organise events like charity runs, galas, or workshops. Participants may need to sign contracts that outline the terms of participation, including fees, liability waivers, and cancellation policies.
Key provisions of the Consumer Rights Act 2015
The Act applies both to “contract terms” and “consumer notices”, and so charities need to be aware of their use of both.
Contract terms are any wording in a contract that gives rise to a particular obligation or right, whether or not it appears in written form as a paragraph or clause.
A consumer notice is wording that relates to rights or obligations between a business and a consumer/trader, or which appears to exclude or restrict a consumer's/trader's liability to a business. It includes an announcement or other communication, whether or not in writing, and whether or not expressed to apply to a consumer/trader, as long as it is reasonable to assume that it is intended to be seen or heard by one. Consumer notices are often used, for instance, in public places such as in shops or car parks, as well as online and in contractual documentation.
The Act requires that contract terms and consumer notices must:
- not create a significant imbalance between the parties (for example in respect of their rights and obligations). They must be fair.
- be written in plain and intelligible language, be jargon-free and be clearly presented. They must be transparent.
Examples of unfair contract terms
Examples of unfair contract terms include:
- terms that allow one party to unilaterally change the contract without a valid reason;
- terms that limit the liability of one party in an unreasonable manner; and
- terms that bind the consumer to hidden terms (e.g. to the payment of fees or commission) that they had no opportunity to read before signing.
Implications for charities
Staying informed about the law on unfair contract terms is crucial for charities to protect their interests. Charities should also be aware that they may be subject to related but additional requirements depending on the sector and regulatory regime in which they operate. For example, the Financial Conduct Authority's Consumer Duty requires businesses which are subject to financial services regulation to provide clear and understandable communications to consumers (including through contractual documentation).
We would suggest that charities periodically review any standard form contractual documentation under which they provide goods or services to individuals (and related communications), to check to ensure that they do not contain any unfair terms (particularly by reference to the list highlighted above), that they are in plain English, and that they are user friendly.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
