These regulations have been designed to establish rights for the consumers as a whole (including timeshare consumers) and over and above the laws of tort and general common law which the courts submit to in the jurisdictions of Europe.
The Regulations
All timeshare trader and suppliers who use standard contract terms with consumers must comply with these Regulations, which implement EU Directive 93/13/EEC on unfair terms in consumer contracts (the Unfair Contract Terms Directive).
The Regulations came into force on 1 July 1995 and have been amended several times. They were re-issued on 1 October 1999. The Office of Fair trading (OFT) enforcement role has been shared with ‘Qualifying Bodies’, including all Local Authorities (providing a trading standards service), specialist regulators and Which?
This OFT/TCA guidance does not state the law, only a view on how the law may or will to be interpreted by the courts.
Enforcement
Under the Regulations the OFT has an ordained duty to mull over any complaint received about unfair terms. Where a term (s) in a contract is considered unfair, enforcement action may be taken on behalf of timeshare consumers to stop its use in part or whole and if necessary by seeking a court injunction in England and Wales or an interdict in Scotland.
The OFT cannot take action on behalf of you or seek redress for individual timeshare consumers.
However the Regulations transmit to timeshare consumers certain legal rights in respect of unfair terms. Being aware of this act Timeshare consumers can take their own legal advice and take action independently of any planned or preserved action taken by the OFT or the other enforcers.
A term found by any court to be unfair is not binding on timeshare consumers.
In addition, Part 8 of the Enterprise Act 2002 gives the OFT and certain other bodies (enforcers) separate powers against traders who breach and continually breach consumer legislation.
Under Part 8, the OFT and other enforcers can seek enforcement orders against businesses that breach UK laws giving effect to specified EC/EU Directives – including but not limited to the Unfair Contract Terms Directive. This is generally actioned where there is a real (as opposed to fanciful) threat of harm to the collective interests of timeshare consumers.
In addition, the Enterprise Act creates the legal framework enabling the OFT to perform a coordinating role to ensure that action is taken by the most appropriate body noted in Unfair contract terms guidance and dependant on each case.
1)The Test of fairness
The Regulations apply a test of fairness to all timeshare standard terms (terms that have not been individually negotiated) in timeshare and club contracts used by businesses with timeshare consumers, subject to certain exceptions.
The main exemption is for terms that set the price or describe the main subject matter of the contract (usually known as ‘core terms’) provided they are in plain and intelligible language. The Regulations thusly apply to what is commonly called ‘the small print’ of standard form consumer contracts.
A standard term is unfair ‘if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of any timeshare consumer.
Unfair terms are not enforceable against the consumer.
The requirement of “good faith” embodies a general ‘principle of “fair and open dealing”. It means that terms should be expressed fully, clearly and legibly and that terms that might disadvantage the consumer should be given appropriate prominence (i.e in bold).
However transparency is not enough on its own, as good faith relates to the substance of terms as well as the way they are expressed and used.
It requires a supplier of a timeshare product or service not to take advantage of consumers and user’s who are in a weaker bargaining position, or lack of experience, in deciding what their rights and obligations shall be.
Timeshare Contracts should be drawn up in a way that respects consumers’ legitimate interests.
In assessing fairness, we take note of how a term could be used. A term is open to challenge if it is drafted so widely that it could cause consumer detriment. It may be considered unfair if it could have an unfair effect, even if it is not at presently being used unfairly. In practice and there is no current Per Lord Bingham of Cornhill in Director General of Fair Trading v First National Bank plc [2001]UKHL 52. For instance if a club changed its purpose and altered clause in the constitution so that a forward purpose could be introduced then those new terms would be removed from the contract.
Unfair Contract Terms
The inclusion of contractual terms are subject to a test (in the courts) so that they are used fairly. In such cases fairness can generally be achieved by redrafting the term more precisely, so that it reflects the practice and current intentions of the supplier. These are generally done if the terms do not read right and does not fully express the interests of the parties or they frustrate the purpose of the terms to the detriment of the contracting parties.
Schedule 2 to the Regulations illustrates the meaning of ‘unfairness’ by listing some types of terms which may be regarded as unfair. The 17 groups of terms covered in Part II correspond to the 17 headings used in paragraph1 of Schedule 2. The terms listed are not necessarily unfair – it is a “grey area” not a so called ‘black’ list. That said terms are under suspicion of unfairness if they either have the same purpose or can produce the same result as terms in the ‘grey’ list. They do not have to have the same form or mechanism.
All the illustrative terms listed in Schedule 2 have the object or effect of altering the position which would exist under the ordinary rules of contract and the general law if the contract were silent. They either protect the supplier from certain sorts of claim in law which the consumer might otherwise make, or give rights against the consumer that the supplier would not otherwise enjoy.
The OFT’s/courts starting point in assessing the fairness of a term is, therefore, normally to ask what would be the position for the timeshare consumer if it did not appear in the contract. The principle of freedom of contract can no longer be said to justify using standard terms to take away protection consumers would otherwise enjoy.
The Regulations recognise that contractual small print is in no real sense freely agreed with consumers. Where a term changes the normal position seen by the law, as striking a “fair balance” it is regarded with inquisitive suspicion.
Transparency is also fundamental to fairness. Regulation 7 says that standard terms must use plain and intelligible language. Taking account of the Directive the Regulations implement, this needs to be seen as part of a wider requirement of putting the timeshare consumer into a position where he can make a reasonable informed choice. Thus even though a term would be clear to a lawyer, we will probably conclude that it has the potential for unfairness if it is likely to be unintelligible to normal timeshare consumers and thereby cause detriment, or if it is misleading (in which case its use may also be actionable as an unfair commercial practice).
Moreover, unfair contract terms in guidance 11, timeshare consumers need adequate time to read terms before becoming bound by them, especially lengthy or complex terms, and this can also be a factor in assessing fairness.
Examples of unfair terms
One point needs to be particularly stressed any revised terms should not be seen ‘cleared’ by the OFT for general use. The revisions reflect our assessment of what a court would be likely to consider fair in the particular contract under consideration. Their view and that of others are not binding on the courts, or upon other enforcers, nor does it fetter the freedom of the OFT itself to take future enforcement action in the interests of consumers. They have a statutory duty to consider complaints about any terms brought to our attention, including any terms that have been revised as a result of our actions.
The Consumer Protection from Unfair Trading Regulations 2008
The Consumer Protection from Unfair Trading Regulations 2008, or CPRs, came into force on 26 May 2008, transposing the Unfair Commercial Practices Directive into UK law. They introduce a general duty not to trade unfairly and ban certain specified practices. The OFT and the Department for Business, Enterprise and Regulatory Reform have jointly issued guidance on the CPRs.22 www.oft.gov.uk/shared_oft/business_leaflets/530162/oft1008.pdf
See full reports provided to consumers by the TCA here.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk