Press Releases | February 2010

Any contracts for the supply of goods or services to consumers have to be drafted to ensure that the terms and conditions are not unfair or unreasonable. To ensure that this is the case, the Government has brought into effect many laws and regulations to provide protection where the contract itself may not do so. In particular The Unfair Terms in Consumer Contracts Regulations 1999 was brought in to protect consumers from "unfair and unreasonable" contractual terms.

Therefore, as a trader, you have to be very careful about what you include when drafting standard terms and conditions for use in consumer transactions.

It is reasonable to assume that a clause allowing the trader to recover its legal costs where a court would not allow such recovery could be deemed to be unfair, but a recent case has suggested that this is not always the case. 

In Robert Shaw v Nine Regions Limited the High Court ruled that a term in a standard form loan agreement allowing a lender to recover its legal costs from the consumer was reasonable under Regulation 5 of the Regulations. The amount claimed from the consumer in this case came within the courts "small claims" ambit, where costs are usually irrecoverable - but the judge decided to award the lender its costs.

Alec Brooks, partner and head of the commercial team at Lamb Brooks solicitors said "this decision helpfully clarifies that it may be possible to obtain costs in a small claims case where the parties make appropriate contractual provision to recover those costs. I would therefore recommend that any traders review their standard terms and conditions to ensure that if the situation arises they are able to recover their legal costs from their customers. I also recommend that they check their business insurance policies for legal expenses cover, which will help in the event of a dispute arising."

For more information, please contact Alec on 01256 305503 or email him at alec.brooks@lambbrooks.com.