Don’t sign that unfair contract

As traders and consumers trade with each other, different forms of agreements take place where rights and obligations are set. While it usually seems all rosy especially at the beginning of the relationship, some businesses set out to create and use unfair terms to craft consumer contract terms to protect themselves in the event a dispute arises. This disposition creates an imbalance in the supplier-consumer relationship and it is almost at the detriment of consumers who lack the expertise to detect signs of unfairness in the contracts until when it is too late. Most consumers always sign contracts without reading and later claim to have been in a hurry to read or claim the contract document was too lengthy to read. The result is that consumers are usually left with substandard products or bad service with no way out of the contract owing to terms that literally hemmed them in. In the worst cases, cancelling the contracts that they find them unreasonable, could result in further losses in the form of penalties such as having to pay exorbitant administration fees.

In the market, the supplier of goods generally seem too indifferent to consumers welfare although this would be unfair to the few who make an effort. Most seem to be primarily interested in harvesting benefits in the market and therefore quick to impose standardised terms. Consumers are generally gullible and they usually pay little attention to the terms of the contract. They only realise their mistake when the dispute arises.

To create some form of external control to remedy the imbalance in the rights and duties of consumers and suppliers that tend to exist in the market economy, Botswana enacted the Consumer Protection Act of 2018 (“the Act”) to curb the use of terms that create an imbalance between consumers and suppliers. Information disclosure alone has been found to be insufficient and not able to remedy the market failures owing to the imbalance that exists between consumers and suppliers as a result of unfair or unjust terms as consumers are usually given no alternative but to accept the standard terms.

In accordance with Section 23 of the Act, it is unlawful for the supplier of goods to use unfair or unjust terms in consumer contracts. This includes contract terms that enable the supplier to unilaterally amend the terms of the contract or agreement, or enable the supplier to price the goods or services in a manner that is unfair, unreasonable or unjust, enables the supplier to market goods or services in a manner that is unfair, unreasonable or unjust or requires a consumer or other person to whom any goods or services are supplied at the direction of the consumer to waive any right, to assume any obligation under the contract or agreement, and to waive any liability.

The fairness of a particular term is usually assessed in light of the contract as a whole, including any other terms that may offset the unfairness of the term. For example, additional benefits offered to the other party can counterbalance a potentially unfair term. This means that a term could be unfair in one contract but not unfair in another.

To be ‘unfair’, a term must:

cause a significant imbalance in the parties’ rights and obligations

not be reasonably necessary to protect the legitimate interests of the party advantaged by the term, and

cause financial or other detriment (such as delay) to the consumer if it were relied on

enable one party (but not another) to limit or avoid their obligations under the contract

enable one party (but not another) to terminate the contract

terms that penalise one party (but not another) for breaching or terminating the contract

terms that enable one party (but not another) to vary the terms of the contract.

In an endeavour to further safeguard the detrimental effect of unfair contract terms, the Act made it mandatory for suppliers to make consumers aware of certain terms and conditions in the contract. This covers terms that, for example, limit the liability of the supplier in a particular transaction. For example, if the supplier sells the car to a consumer and the supplier includes in the agreement that the vehicle is “sold as is”, the law requires the supplier to explain the implications of such terms and conditions and additionally where they consent to such terms and condition should show by signing and initialling next to such terms. If during the investigation by the Authority the supplier is found not to have complied with the requirement of the Act, this is how intentional the Act is about levelling the supplier-consumer relationship.

An example of a consumer complaint that hinges on unfair, unreasonable or unjust contract terms and the obligation of the supplier to make consumers aware of certain terms and conditions in contracts would be a case where the consumer enters into a contract with a goods removal company for household goods with a term that the removal company accepts no liability for any damage arising as a result of the removal company’s negligence.

In the above case, the contract seeks to limit the rights of the consumer he would otherwise have against the removal company if, during the removal of goods, goods get damaged due to mishandling by the supplier.

The Authority, if following the investigations of the case found that the consumer was made to consent to such in a manner that violates Section 23 on fair terms and Section 24 of the Act, such a contract would, in accordance with Section 23(3) of the Act be declared unenforceable against the consumer.

Suppose a consumer enters into a contract with a supplier to buy car parts. Under the terms of the contract, the parts must be supplied by a date specified in the contract. If the supplier is unable to supply the parts by the deadline, the consumer has the power to terminate. However, if he does so, he must forfeit his deposit or advance payments.

In the case above, the term would be viewed to be in contravention of Section 23 of the Act.

Most seem to be primarily interested in harvesting

benefits in the market and therefore quick to impose standardised

terms.

What to do if the supplier uses unfair terms in a contract

Ask the other party to remove the term or amend it so it is no longer unfair

Talk to a lawyer

Contact the Competition and Consumer Authority