¹ See, for example, D Kennedy, ‘Distributive and Paternalist Motives in Contract and Tort Law with Special Reference to Compulsory Terms and Unequal Bargaining Power’ (1982) Maryland Law Review 563; S Grundman, W Kerber and S Weatherill (eds), Party Autonomy and the Role of Information in the Internal Market (De Gruyter, 2001); C Willett, ‘Good Faith in Consumer Contracts: Rule, Policy and Principle’ in A Forte, Good Faith in Contract and Property Law (Hart, Oxford, 1999) 181; S Weatherill, EU Consumer Law and Policy (Elgar, Cheltenham, 2005), ch 4; S Smith, Atiyah's Introduction to the Law of Contract (OUP, Oxford, 2005) 319–329 and 323; Howells, G, ‘The Potential and Limits of Consumer Empowerment by Information’ (2005) 32 Journal of Law and Society 3CrossRefGoogle Scholar, 349; C Willett, Fairness in Consumer Contracts (Ashgate, Aldershot, 2007), 2.4.3.4-5, 3.44, 6.4.2 and 6.5; and, in the context of trade practices, see Willett, C, ‘Fairness and Consumer Decision Making’, (2010) 33 Journal of Consumer Policy 247CrossRefGoogle Scholar.

² For a very recent analysis of the tension in EU law between a social justice, consumer need based approach (which would favour the ‘irreducible rights’ approach discussed below) and a more free market, self reliant consumer choice approach (which is likely to incline to greater focus on transparency as a legitimizing factor) see H-W Micklitz, ‘Jack is out of the Box-the Efficient Consumer-Shopper’ (2009) JFT 3–4/2009, s 417.

³ SI 2083.

⁴ 93/13/EEC.

⁵ English and Scottish Law Commissions, Unfair Terms in Contracts, Law Com No 292, Scot Law Com 199.

⁶ COM (2008) 614 final. The CRD would bring together, with some amendments, the existing Directives on Unfair Contract Terms (n 4), Consumer Sales (99/44/EEC), Distance Selling (97/7/EC) and Doorstep Selling (85/577/EEC).

⁷ SI 1277.

⁸ 2005/29/EC.

⁹ An Australian Consumer Law: Fair Markets-Confident Consumers (hereafter, ‘An Australian Consumer Law’), 17 February 2009, available at http://www.ag.gov.au/cca, ch 6; followed by, The Australian Consumer Law: Consultation on draft provisions on unfair contract terms (‘Unfair Terms Consultation’), Australian Government, The Treasury, 11 May, 2009; and finally the Competition and Consumer Act 2010, Schedule 2, Chapter 2, Part 2 (3) (and on this reform see A Guide to the Unfair Contract Terms Law, Australian Competition and Consumer Commission, 2010).

¹⁰ Victorian Fair Trading Act 1999, s 163 (3) (repealed); English and Scottish Law Commissions, Unfair Terms in Contracts (n 3), Draft Unfair Contract Terms Bill, ss 14 (1) and (3); First National Bank v Director General of Fair Trading 3 WLR 1297, Lord Bingham, 1308; Office of Fair Trading, Unfair Contract Bulletin, No 4, 1997; Office of Fair Trading, Unfair Contract Terms Guidance, 2001, Analysis of Terms Breaching Regulation 7-Plain English and Intelligible Language, para 19; and C Willett, Fairness in Consumer Contracts: The Case of Unfair Terms (n 1) 2.4.2.2, 2.4.3.4 and 6.4.2.

¹¹ For the purposes of this article I am assuming (as is often, but not always the case) that no alternative (and substantively fairer) terms are offered by the trader in question or by other traders. If the term under scrutiny is sufficiently transparent and there is a transparent, accessible and fairer alternative, the question arises as to whether the law should and/or does uphold the term under scrutiny even although it crosses a certain threshold of unfairness in substance. However, in the absence of this possible justification for upholding the term, we return to the question as to whether transparency alone is sufficient. On the issue of alternatives see C Willett, ibid, 2.4.2.2 and 2.3.4 (v).

¹² On quantity, in particular, see Better Regulation Executive and the National Consumer Council, Warning: Too Much Information Can Harm (Interim Report), NCC, London, 2007.

¹³ So called ‘hyperbolic discounting’, on which see Frederick, S, Lowenstein, G and O'Donoghue, T ‘Time Discounting and Time Preference: A Critical Review’ (2002) XL Journal of Economic Literature 351CrossRefGoogle Scholar.

¹⁴ Willett (n 1) 2.4.2.2.

¹⁵ See I Ramsay, Consumer Law and Policy (Hart, Oxford, 2007) 73–74.

¹⁶ Willett (n 1) 2.4.2.2.

¹⁷ See Ramsay (n 15) 71–85; S Frederick, G Lowenstein and T O'Donoghue (n 13) ‘Time Discounting and Time Preference: A Critical Review’ (2002) XL Journal of Economic Literature 351Google Scholar; Lee, J and Hogarth, JM, ‘The Price of Money: Consumer’ Understanding of APRs and Contract Interest Rates' (1999) 18 Journal of Public Policy and Marketing 1, 66–76Google Scholar; and TA Durkin, ‘Credit Card Disclosures, Solicitations and Privacy Notices: Survey Results of Consumer Knowledge and Behaviour’ (2006) August, Federal Reserve Bulletin A109–A121.

¹⁸ This is a phrase used by Hugh Beale in this context in H Beale, ‘Legislative Control of Fairness’ in J Beatson and D Freidmann, Good Faith and Fault in Contract (OUP, Oxford, 1995) 245. Insisting on a certain level of fairness in substance has also been referred to as being about creation of a ‘social market’, within which certain basic social rights are guaranteed even within a market exchange (see Collins, H, ‘Good Faith in European Contract Law’ (1994) 14 Oxford Journal of Legal Studies, 228CrossRefGoogle Scholar, 246).

¹⁹ UTCCR, reg 6 (2) (b) (93/13/EEC, art 4 (2)); An Australian Consumer Law (n 9) 34; and the Trade Practices Amendment Bill 2010, (n 9) s 26 (1) (b). On the UK provision, see recently Office of Fair Trading v Abbey National and Others [2009] UKSC 6.

²⁰ Unfair Contract Terms Act-UCTA-1977, ss 2 (1), 6 (2) and 7 (2).

²¹ 99/44/EC, arts 2, 3 and 7 (1).

²² CRD (n 5) art 34 and Annex II.

²³ CRD, Annex II, para (b).

²⁴ Para (b).

²⁵ Excluding or hindering the right to take legal action or exercise a legal remedy, particularly by requiring consumers to take disputes exclusively to arbitration not covered by legal provisions (para (c)); restricting the evidence available to the consumer or imposing on him a burden of proof that, under the applicable law, would lie with the trader (para (d)); and giving the trader the right to determine if the goods or services are in conformity or the exclusive right to interpret any term of the contract (para (e)).

²⁶ UCTA, s 2 (2).

²⁷ S 3 (2) (a).

²⁸ S 8.

²⁹ S 4 (1).

³⁰ S 3 (2) (b).

³¹ See George Mitchell (Chesterhall) Ltd v Finney Lockseeds Ltd [1983] 2 AC 803 (HL); Stag Line Ltd v Tyne Ship Repair Group Ltd, The Zinnia [1984] 2 Lloyd's Rep 211; Britvic Soft Drinks v Messer UK Ltd [2002] EWCA Civ 548, [2002] 2 Lloyd's Rep, 368; this being based on the reference in guidelines specifically applicable to such cases to ‘whether the customer knew or ought reasonably to have known of the existence or extent of the term....’ (UCTA, Sch 2 (c)).

³² Smith v Bush [1989] 2 All ER 514.

³³ Indeed, even in cases involving exclusion or restriction of liability to commercial customers (where it might be thought that transparency would be more readily viewed as a legitimizing factor) the courts have been prepared to hold that a term can fail the test of reasonableness (on the basis of factors such as the substantive content, the insurance position and relative bargaining power) despite the term being known of and understood by the customer. See, for example, the George Mitchell case (n 31).

³⁴ UTCCR, regs 10–15.

³⁵ See the Unfair Contract Terms Bulletins 1–29 covering cases dealt with from the passing of the initial 1994 Unfair Terms in Consumer Contracts Regulations until September 2004; and see the lists of Unfair Terms cases with Undertakings that replaced the bulletins and run from October 2004 (available on the Consumer Regulation Website-http://www.crw.gov.uk).

³⁶ UTCCR, reg 5 (1) (UTCCD, art 3 (1)); which also provide that, in order to be subject to the test, the term must be one that has not been individually negotiated. This obviously raises separate issues as to the underlying attitude to freedom of choice and fairness. These are beyond the scope of this paper, but see C. Willett, ‘Unfair Terms’, in L Antoniolli and F Fiorentini, A Factual Assessment of the Draft Common Frame of Reference, (Sellier, Munich, 2011) 41, 42–53.53–76.

³⁷ CRD (n 6) art 32 (1).

³⁸ UTCCR, reg 5 (2) and Schedule 2 (UTCCD, art 3 (3) and Annex).

³⁹ CRD (n 6) paras 1 (a), (m), (n) and (q).

⁴⁰ Para 1 (b).

⁴¹ Paras 1 (c) and (o).

⁴² Para 1 (f).

⁴³ Para 1 (d).

⁴⁴ Para 1 (e).

⁴⁵ Para 1 (f).

⁴⁶ Para 1 (g).

⁴⁷ Para 1 (h).

⁴⁸ Paras 1 (j) and (k).

⁴⁹ Para 1 (l).

⁵⁰ Para 1 (p).

⁵¹ Above (n 6) art 35.

⁵² See discussion by Willett (n 1) 6.3.3 and 6.5.

⁵³ Unfair Contract Terms Guidance, 2001, paras 1.3, 2.2.2, 2.3.1 and 2.3.3.

⁵⁴ ibid paras 2.6.5. Limitation of liability for delays seems generally to be viewed as unfair if the limitation applies in circumstances that were within the control of the trader.

⁵⁵ See Willett, Fairness in Consumer Contracts (n 1) 6.5.

⁵⁶ H Collins, ‘Good Faith in European Contract Law’ (n 18) 249; R Brownsword, G Howells and T Wilhelmsson, ‘Between Market and Welfare: Some Reflections on Article 3 of the EC Directive on Unfair Terms in Consumer Contracts’ in C Willett (ed), Aspects of Fairness in Contract (OUP, Oxford, 1996) 45; H Beale, ‘Legislative Control of Fairness’ (n 18) 243.

⁵⁷ See K Zweigert and H Kotz, An Introduction to Comparative Law (3^rd edn, OUP, Oxford, 1998) 329; in relation to Austria see P Kolber, ‘Report on the practical implementation of directive 93/13/EEC in Austria’, in European Commission The Unfair Terms Directive Five Years on Evaluation and Future Perspectives, Brussels 1–3/7/1999); and in relation to Italy, see Nebbia, P, ‘Law as Tradition and the Europeanization of Contract Law: A Case Study’ (2004) Yearbook of European Law 381Google Scholar. In addition, imbalance (specifically as a test for the fairness of consumer contract terms) seems to have roots both in Germany where art 9 of the 1976 AGBG referred—along with good faith—to ‘unreasonable disadvantage’, a concept that seems similar to imbalance (the new Civil Code-BGB—art 307 (1) uses the same language) and France (where the travaux preparatoires to the Loi Scrivener of 1978 referred to an ‘evident imbalance in parties’ rights and obligations').

⁵⁸ The ECJ seems to have given a central role to the question as to whether there are any ‘benefits’ for the consumer (see C-237/02 Freiburger Kommunalbauten GmbH Baugesellschaft & Co KG (Judgment) 1 April 2004).

⁵⁹ See UTCCR, reg (1) (UTCCD art 4 (1)), emphasizing the relevance of other terms in this (and other) contracts ‘on which it is dependent’.

⁶⁰ Tenreiro, M, ‘The Community Directive on Unfair Terms and National Legal Systems’ (1995) 3 European Review of Private Law 279Google Scholar; and S Smith (1994) 47 Current Legal Problems 8.

⁶¹ Recital 16 to the Preamble.

⁶² See C Willett, Fairness in Consumer Contracts (n 1) 5.7.2; and on this approach in Australia, below at 373 (iii).

⁶³ See generally, S Whittaker and R Zimmerman, Good Faith in European Contract Law (CUP, Cambridge, 2000); M Hesselink, ‘Good Faith’ in A Hartkamp et al (eds), Towards a European Civil Code (Kluwer, The Hague, 2004) 471; H-W Micklitz, The Politics of Judicial Co-operation in the EU (CUP, Cambridge, 2005) 372–373; AGB 1976, art 9 (now BGB, art 307) (Germany); and Hoge Raad 15-11-1957 (Netherlands).

⁶⁴ CRD (n 6) preamble, recital 48.

⁶⁵ CRD (n 6) art 32 (2).

⁶⁶ Micklitz (n 63) 355–423.

⁶⁷ See, respectively, BGB, art 305c and BGB, art 307 (1).

⁶⁸ [2001] 3 WLR 1297.

⁶⁹ Lord Bingham at 1307–8 and Lord Steyn, 1313.

⁷⁰ At 1313.

⁷¹ At 1307.

⁷² ibid.

⁷³ 1307–1308.

⁷⁴ At 1313.

⁷⁵ At 1308.

⁷⁶ ibid.

⁷⁷ ibid.

⁷⁸ At 1313.

⁷⁹ ibid.

⁸⁰ See the Judgments of Lord Hope (1314–1318), Lord Millett (1318–1320) and Lord Rodger (1320–1324).

⁸¹ Lord Bingham, 1308, Lord Steyn, 1313–1314, Lord Hope, 1316 and Lord Millett, 1319.

⁸² From Beale, ‘Legislative Control of Fairness’ (n 18) 245, cited at [2000] 2 All ER 759, 769.

⁸³ Office of Fair Trading v Foxtons Ltd [2009] EWHC 1681 (Ch).

⁸⁴ See paras 90, 101 and 103.

⁸⁵ See paras 94, 101 and 106.

⁸⁶ Willett, Fairness in Consumer Contracts (n 1) 6.5.

⁸⁷ Unfair Terms in Contracts (n 4) 3.84-96 and Draft Unfair Terms Bill, s 4 (1).

⁸⁸ Marleasing SA v La Commercialde Alimentacion [1992[ 1 CMLR 305; Faccini Dori [1995[ All ER (EC) 1.

⁸⁹ Unfair Terms in Contracts (n 5) Draft Unfair Terms Bill, s 4 (2) (1).

⁹⁰ ibid 3.93.

⁹¹ See Freiburger Kommunalbauten (n 58).

⁹² An ‘exclusive jurisdiction’ clause (Joined Cases C-240/98 and C-244/98 Oceano Grupo Editorial SA Quintero [2000] ECR I-4941).

⁹³ Commercial Bank of Australia Ltd v Amadio (1983) 46 ALR 402.

⁹⁴ Per Kitto J., 415.

⁹⁵ ibid.

⁹⁶ See, for example, ACCC v C G Berbatis Holdings Pty Ltd (2003)197 ALR 153.

⁹⁷ Per Gleeson CJ, ibid 157.

⁹⁸ Per Gummow and Hayne JJ, 168.

⁹⁹ TPA, s 51 AB (2) (b).

¹⁰⁰ S 51 AB (2) (a).

¹⁰¹ S 51 AB (2) (d).

¹⁰² S 51 AB (2) (e).

¹⁰³ S 51 AB (2) (c).

¹⁰⁴ [1999] FCA 1728.

¹⁰⁵ [2004] FCA 926.

¹⁰⁶ Generally on which see Zumbo, F ‘Dealing with Unfair Terms in Consumer Contracts: Is Australia Falling Behind?’ (2005) 13 Trade Practices Law Journal 70Google Scholar; ibid. ‘Dealing with Unfair Terms in Consumer Contracts: The search for a new regulatory model’ (2007) 13 Trade Practices Law Journal 194Google Scholar; and ibid.(2007), Submission to the Productivity Commission's Inquiry into Australia's Consumer Policy Framework.

¹⁰⁷ (1986) 5 NSWLR 610.

¹⁰⁸ At 622.

¹⁰⁹ At 621.

¹¹⁰ [2002] NSWCA 413.

¹¹¹ Director of Consumer Affairs Victoria v AAPT [2006] VCAT 1493, para 34.

¹¹² ibid para 34 and 44; Free v Jetstar Airways Pty Ltd, Civil Claims [2007] VCAT 1405; and see (n 62) and related text.

¹¹³ Para 47.

¹¹⁴ At para 41 (see (n 75) and related text on Lord Bingham in the First National Bank case on ‘fair and open dealing’).

¹¹⁵ At para 43, citing Lord Steyn in First National Bank (n 78) 1313.

¹¹⁶ At para 39.

¹¹⁷ At para 47.

¹¹⁸ ibid.

¹¹⁹ ie that good faith requires transparency, but that transparency is not sufficient where the term is unfair enough in substance (see n 82 and related text).

¹²⁰ Para 48 and see (n 82).

¹²¹ Competition and Consumer Act 2010 (n 9) 24 (1); and An Australian Consumer Law (n 9) 30.

¹²² An Australian Consumer Law, ibid; although the Productivity Commission were, in fact, ambivalent about good faith, also stating that there were good grounds for retaining it (Productivity Commission, Review of Australia's Consumer Policy Framework, No 45, April 2008, vol 2, at 159).

¹²³ Competition and Consumer Act (n 9), s 24 (2) (a).

¹²⁴ ibid s 24 (3).

¹²⁵ Unfair Terms Consultation (n 9)12; and this view is confirmed in A Guide to the Unfair Contract Terms Law (n 9) 12.

¹²⁶ An Australian Consumer Law (n 9) 35–42.

¹²⁷ Competition and Consumer Act (n 9), s 25 (1).

¹²⁸ Unfair Terms Consultation (n 9) s 4 (n).

¹²⁹ Competition and Consumer Act (n 9), ss 25 (1) (n) and 25 (2).

¹³⁰ Trade Practices Act 1974, Part V, Division 2.

¹³¹ An Australian Consumer Law (n 9) 37–38; Competition and Consumer Act 2010 (n 9), Chapter 3 (2), ss 64 (1).

¹³² Competition and Consumer Act (n 9), s 25 (1) (a), (b), (d) and (e).

¹³³ ibid s (k), (l) and (m).

¹³⁴ An Australian Consumer Law, (n 9). Bans were proposed on terms stipulating that certain things (e.g. a certificate or statement by the trader) are conclusive evidence of something (eg the amount owed) (at 37); terms deeming something to be a fact (at 35); and terms mandating arbitration or otherwise hindering access to courts or arbitration (at 42).

¹³⁵ Competition and Consumer Act (n 9), s 25 (1) (i).

¹³⁶ An Australian Consumer Law (n 9) 35–36.

¹³⁷ ibid 40–41 and on the approach of the UK OFT to such terms under the general test of unfairness see C. Willett, Fairness in Consumer Contracts (n 1) at 6.3.3.2 (ii) (a).

¹³⁸ An Australian Consumer Law (n 9) 35.

¹³⁹ ibid 38–40.

¹⁴⁰ ibid 40.

¹⁴¹ ibid 41–42.

¹⁴² Willett, Fairness in Consumer Contracts (n 1) 2.4.3.4.

¹⁴³ Because of the factors set out at the text related to notes 12–16.

¹⁴⁴ MJ Trebilcock, ‘An Economic Approach to the Doctrine of Unconscionability’ in BJ Reiter and J Swann, (eds), Studies in Contract Law (Caswell, Toronto, 1980) 379; and C Willett, Fairness in Consumer Contracts (n 1) 2.3.2.1.

¹⁴⁵ See the discussion by W Whitford, Contract law and the Control of Standardised Terms in Consumer Contracts: An American report (1995) 3 European Review of Private Law, 193, 195–199.

¹⁴⁶ Whitford ibid.

¹⁴⁷ See Durkin (n 17).

¹⁴⁸ Such a term is one of those in the UK that is on the ‘indicative and non-exhaustive list of terms that may be regarded as unfair’ (UTCCR, supra, n 2, reg 5 (2), and Schedule 2, para. 1 (l)); and, under the CRD such a term would actually be ‘presumed to be unfair’ (n 6) art 35, Annex III, para I (g).

¹⁴⁹ Having said this, disclosure of legal rights is unlikely to be very successful unless it is backed up by programmes to educate consumers about these rights. This is because consumers will often have very limited knowledge of these rights.

¹⁵⁰ This has been replaced by similar provisions on misleading conduct in the Competition and Consumer Act 2010 (n 9) Schedule 2, Chapter 2, Part 2 (1).

¹⁵¹ An Australian Consumer Law (n 9) 91.

¹⁵² Victorian Fair Trading Act 1999, s 163 (3).

¹⁵³ An Australian Consumer Law (n 9) 91.

¹⁵⁴ OFT (n 10).

¹⁵⁵ UTCCR, reg 10.

¹⁵⁶ Reg 7 (1).

¹⁵⁷ Reg 7 (2).

¹⁵⁸ Reg 7 (2).

¹⁵⁹ OFT, 2001 Guidance (n 10) at 19.6.

¹⁶⁰ CRD (n 6) art 38 (1).

¹⁶¹ Art 32.

¹⁶² Art 31 (1)–(2).

¹⁶³ C Von-Bar, E Clive, H Schulte-Nolke, H Beale, J Herre, J Huet, M Storme, S Swann, P Varul, A Veneziano and F Zoll, Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference, Outline Edition (Sellier, Munich, 2009).

¹⁶⁴ Art II.-9:403.

¹⁶⁵ Art II.-9:402 (1).

¹⁶⁶ Art II.-9:402 (2).

¹⁶⁷ See (n 67) and related text.

¹⁶⁸ Consumer Credit (Agreements) Regulations 1983, SI 1983/1553, regs 2–5.

¹⁶⁹ See, for example, the Consumer Protection (Distance Selling) Regulations 2002, SI, 2334, reg. 7; and more generally, the Consumer Protection from Unfair Trading Regulations, reg. 6 (4) (g).

¹⁷⁰ See, for example, the Queensland Consumer Credit Code, reprint, 22 June, 2009, s 14 (1) (b).

¹⁷¹ HM Government, A Better Deal for Consumers: Delivering Real Help Now and Change for the Future, Cm 7669, July 2009, 3.5.1.

¹⁷² See the above discussion of the First National Bank case (in particular n 76 and related text).

¹⁷³ The powers in question were those under CCA, s 129 to grant a time order and under CCA, ss 137–140 (now replaced by the new s. 140A regime) to review the amounts due.

¹⁷⁴ [2000] QB 672, 688–689.

¹⁷⁵ See Lord Bingham, 1310.

¹⁷⁶ Preamble, recital 16.

¹⁷⁷ See (n 5) and (n 89).

¹⁷⁸ See (n 8).

¹⁷⁹ CPUTR (n 7) reg 26 and UCPD, art 5 (4) (a).

¹⁸⁰ Regs 6 (1) and 6 (3) (a). Even if information is provided there is still a misleading omission if it is hidden, unclear, unintelligible, ambiguous or untimely (reg. 6 (1) (b) and (c)). For discussion of the omissions concept see Willett, ‘Fairness and Consumer Decision Making’ (n 1).

¹⁸¹ It may be very important for regulatory bodies to provide a strong research based justification as to the limited consumer awareness as to their rights in order to support the argument that such information is ‘needed’. This is particularly important because the notion of the ‘average consumer’—the benchmark for assessing what information is needed—as ‘reasonably well informed and circumspect’ is often viewed as setting a relatively non protective standard (see, on these issues, Willett, ‘Fairness and Consumer Decision Making’ (n 1)).

¹⁸² This was formerly contained in the Trade Practices Act 1974, s 52; which has now been replaced by the Competition and Consumer Act 2010 (n 9) Schedule 2, Chapter 2, Part 2 (1).

¹⁸³ See discussion in L Griggs, E Webb and A Freilich, Consumer Protection Law (OUP, Oxford, 2008) 54–56.

¹⁸⁴ Demagogue Pty Ltd v Ramensky [1993] ATPR 41–203; Stora Enso Australia Pty Ltd v CPI Group Ltd (2007) ATPR (Digest) 46–270.

¹⁸⁵ See Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601 and Tiplady v Gold Coast Carlton [1984] ATPR 40–491.

¹⁸⁶ Of course, even if it is made clear that terms that are sufficiently unfair in substance cannot be legitimised by transparency, this only clarifies one important part of what we mean by fairness. The obvious related question is as to what level of unfairness in substance a term must reach before transparency loses its legitimising force. There is no space to develop this here, but see C Willett, Fairness in Consumer Contracts (n 1) 5.5.6.

¹⁸⁷ See above (n 183) on the importance of there being a strong research base for such disclosure arguments.