More than half of UK businesses do not have a clear picture of the law regarding unfair contract terms, according to a new survey for the Competition & Markets Authority.
The findings come as the CMA launches a new campaign, consisting of simple videos and guides, to inform businesses about what makes a term "unfair" and help them understand how to treat their consumers fairly.
Only 45% of those surveyed claimed to know the rules on unfair terms well, whereas 36% owned up to not having a strong grasp, and 18% admitted they had never heard of them.
The research also revealed that some businesses think a signed contract is final, not realising that they cannot enforce an unfair term against a consumer. Others may copy terms from larger businesses or competitors, assuming incorrectly that these will be automatically fair and legally binding.
Unfair terms instanced by the CMA include:
- keeping all of a customer’s deposit if they cancel, regardless of the amount the business is actually losing as a result;
- using excessively long notice periods that end up tying customers into a contract for longer than they want; and
- excluding the business’s liability for things that are its fault (delays, or faulty goods or services).
Whereas 67% of UK businesses sell to consumers, only 15% said when asked that they were familiar with the Consumer Rights Act 2015, which contains the rules on using unfair terms.
Paul Latham, the CMA's director of communications, commented: "We know that the majority of businesses want to do the right thing by their customers, but it’s worrying that many businesses are not familiar with the law.
"That’s why we have launched this campaign to help businesses protect themselves against breaking the law, and against using contracts that they can’t enforce."
The CMA's new guides on how businesses can check their own terms for fairness include:
- animated videos on common areas where terms can be unfair;
- simple at-a-glance guides; and
- an online quiz for businesses to check how much they know about the law.
They complement the more detailed guidance on unfair terms that the CMA produced in 2015.